Evolution of Alternate Dispute Resolution: Indian Perspective

27th February, 2024 - 5:25 am Categories: Dispute India News & Updates 0 Comments

Introduction

We live in a society made up of individuals. People with different views, different opinions, different cultures, different languages, and a variety of other differences. As a result, when all of these disparities are combined, it is ubiquitous for disputes to arise.

After the independence of India and with the abolition of the Privy Council, the courts in India were organized under a three-tier system as hereunder:

• The Supreme Court of India
• The High courts
• The Lower courts

Therefore, all issues that could not be resolved on their own were brought before these courts.

People have traditionally only been aware of this method in order to resolve disputes. However, there are other methods that can be used to resolve a dispute without going to court and without going through a tiresome and protracted process for justice.

Because they provide an alternative to litigation, these additional alternatives are referred to as Alternate Dispute Resolution i.e., ADR. Though there are early examples of various types of ADR being utilised in India, legal advances in this area began in the nineteenth century.

As said in the words of – Sandra Day O’Connor¹

“The courts of this country should not be the places where resolution of disputes begins. They should be where the disputes end after alternative methods of resolving disputes have been considered and tried.”

The above-quoted words of Sandra Day O’Connor who was the first female associate justice of the Supreme Court of the United States from 1981 to 2006, show that the importance of ADR is increasing in recent years.

Now, what ADR, its types, its history, and its growth prospects are, will be discussed.

ADR Define?

ADR is an acronym for “Alternate Dispute Resolution” when talked about in the context of the law. It is a process through which the disputes among parties are resolved amicably without the intervention of judicial machinery and without any trial.

In simple words, ADR can be referred to as a method of settling disputes outside the courtroom without getting involved in the tedious and lengthy process of litigation.

More about ADR…

• ADR is a party-centric process in which both parties agree to resolve the disagreement in a way that suits them both.
• Because it is a party-centric strategy, it includes party autonomy, making it flexible.
• It benefits not only the parties but also the courts. The strain on courts is also minimized by resolving conflicts through such alternative approaches.
• ADR, with its various approaches, plays a vital role in India in dealing with the state of cases waiting in Indian courts.
• People are free to express themselves without fear of legal repercussions. They can reveal the truth without revealing it to a court.
• Because the process does not involve the judicial machinery, all proceedings and outcomes are kept confidential.
• However, not all situations can be resolved by ADR (for example, constitutional cases, criminal cases, and non-compoundable cases).

ADR methods…

ADRs are major of 4 types, which are

• Arbitration
• Mediation
• Conciliation

Evolution² of ADR

In earlier times…

Arbitration or mediation as an alternative to municipal court dispute resolution has been practiced in India since Vedic times. The ‘Brihadaranyaka Upanishad’ is the first work to mention the different types of arbitral bodies, which are the Puga, Sreni, and Kula. They were also known as Panchayats, and they dealt with a wide range of conflicts, including contractual, marital, and criminal matters. The rulings of these Panchayats would be legally binding on the parties to the dispute. With the establishment of Muslim control in India, the concepts of Muslim law were integrated into Indian culture. Those laws, known as Hedaya, were meticulously followed and included procedures for arbitration. Tahkeem meant arbitration, while Hakam meant arbitrator. To be an official judge presiding over the process, the Tahkeem had to possess certain traits.

With the introduction of the East India Company, arbitration as a form of conflict resolution gained traction. The British administration brought with it laws governing arbitration, which were first implemented in the presidential towns of Calcutta, Bombay, and Madras.

Pre-Independence of India

The Bengal Resolution Act, of 1772 and the Bengal Resolution Act, of 1781 were the first to make provisions for arbitration, requiring parties to submit their disagreement to the arbitrator with mutual consent and the arbitrator’s judgment to be binding on both. These acts remained in effect until the Civil Procedure Code was enacted in 1859. Sections 312 through 325 dealt with in-court arbitration, and sections 326 and 327 dealt with out-of-court arbitration. Section 89(1) of the Civil Procedure Code of 1908 required that conflicts be first addressed to ADR. The court was charged with first attempting to assist the parties in reaching an agreement without resorting to litigation.

The India Arbitration Act of 1899 was heavily influenced by its British equivalent. The Act defined “submission” as “a written agreement to submit present and future differences to arbitration, whether or not an arbitrator is named therein.” “Next came the Arbitration (Protocol and Convection) Act, 1937. This Act implemented the Geneva

The Geneva Convention on the Execution of Foreign Arbitral Awards (1927) and the Protocol on Arbitration Clauses (1923).

The Arbitration Act of 1940 was in effect until the 1996 Act was passed. The 1940 statute only addressed domestic issues. The Act had a noteworthy feature in that judicial involvement was given careful consideration at practically all phases of the arbitral process. The arbitral award itself has to be approved by a court of law. The provisions of this Act undercut the objective of arbitration, which was intended to be a process free of court intervention. It reduced the pace of arbitration, making it unable to provide a quick, efficient, and transparent conflict resolution method.

Present Legislation.

In order to modernize the Act of 1940, the government enacted the Arbitration and Conciliation Act, of 1996 in 1996. Various committees on international arbitration and trade met in 1978 and agreed that UNCITRAL³ should take steps to develop consistent rules of the arbitral process. This resulted in the creation of the Model Law on Arbitration, which was thought to be the most effective way to achieve the needed consistency. UNCITRAL adopted the Model Law on June 21, 1985. This amazing legacy had a significant impact on Indian law, and the Model Law was completely included in the 1996 Act.

The 1996 Act fundamentally established arbitration as a cost-effective and expeditious means of dispute resolution. Most crucially, it includes provisions for both domestic and international arbitration. The 1996 Act was revised twice, once in 2015 and once in 2019. “We have consolidated, single, effective, and good legislation to deal with the ADR mechanism.”

[Image Sources: Shutterstock]

ADR Legislations⁴ in India

1)    Code of Civil Procedure, 1908

2)    Indian Arbitration Act, 1899

3)    Arbitration (Protocol and Convention) Act, 1937

4)    The Arbitration Act of 1940

5)    Arbitration and Conciliation Act, 1996

• Mediation Bill, 2021⁵

1)      Code Of Civil Procedure, 1908

Sections 312 to 325 of the Code of Civil Procedure of 1859 deal with arbitration in litigation, whereas sections 326 and 327 permits arbitration without judicial intervention. The Act of 1882 was abolished by the Code of Civil Procedure (Act 5 of 1908). Section 89(1) of the Code of Civil Procedure of 1908 states that cases must be encouraged to proceed to ADR. Under the First Schedule, Order XXXII A, Rule 3 a duty is cast upon the courts to help the parties in the first instance in reaching a settlement over the subject matter of the dispute.

The second schedule dealt with arbitration in lawsuits, briefly allowing for arbitration without the intervention of a judge. Order I, Rule 1 of the schedule states that where all parties agree in any dispute that any difference between them shall be referred to arbitration, they may apply to the court for an order of reference at any time before judgment is announced. This schedule supplemented the terms of the Arbitration Act of 1899 in some ways.

2)      Indian Arbitration Act, 1899 

This Act was heavily influenced by the British Arbitration Act of 1889. It broadened the scope of arbitration by defining “submission” as “a written agreement to submit present and future differences to arbitration, whether or not an arbitrator is named therein.

3)      Arbitration (Protocol and Convention) Act 1937

The Arbitration (Protocol and Convention) Act of 1937 implemented the Geneva Protocol on Arbitration Clauses of 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards of 1927. The purpose of this Act was to give effect to the Protocol and make the Convention operational in India.

4)      The Arbitration Act Of 1940

The Arbitration Act of 1940 solely addressed domestic arbitration. Under the 1940 Act, the court was required to intervene in all three stages of arbitration in the tribunal, namely:

a)      prior to the referral of the dispute

b)      during the proceedings, and

c)      after the award was made

Under this Act provisions were made for the following:

a) arbitration without court intervention

b) Arbitration in cases, that is, arbitration with court intervention in pending lawsuits

c) In circumstances when no litigation was pending before the court, arbitration with judicial participation was used.

Prior to an arbitral tribunal taking cognizance of a case, court intervention was required to initiate the arbitration procedures. It was imperative to prove the existence of an agreement and a conflict. During the course of the proceedings, the court’s participation was required for the extension of time for making an award.

Finally, before the award could be enforced, it had to be established a court rule. The primary functions of ADR were not met by this Act. The Act’s scope of Judicial Interference failed its fundamental aim. It lacked a quick, effective, and transparent system for resolving disputes resulting from overseas trade and investment transactions.

5)      Arbitration And Conciliation Act, 1996

In order to modernize the 1940 Act, the government enacted the Arbitration and Conciliation Act in 1996. The UNCITRAL Secretariat, the Asian African Legal Consultative Committee (AALCC), the International Council for Commercial Arbitration (ICCA), and the International Chamber of Commerce (ICC) held a consultative meeting in 1978, and the participants unanimously agreed that it would be in the interests of International Commercial Arbitration if UNCITRAL initiated steps leading to the establishment of uniform standards of arbitral procedure.

The creation of a Model Law on Arbitration was deemed the best method to attain the needed uniformity. The full text of this Model Law was adopted by UNCITRAL on June 21, 1985. The United Nations has left a great legacy of International Commercial Arbitration, which has affected Indian law. The Model Law was nearly entirely adopted in India in the 1996 Act.

All three prior statutes were repealed by this Act. Its principal goal was to promote arbitration as a low-cost and rapid method of resolving commercial disputes. It applies to both domestic and international commercial arbitration. It was a watershed moment in India’s attempt to find an alternative to the traditional adversarial legal system.

The changes brought about by the 1996 Act were so profound that the whole case law on arbitration developed over the previous fifty-six years became redundant. The Government of India established the 1996 Act through an ordinance and then prolonged its life through another ordinance before Parliament passed it without reference to the Parliamentary Committee.

Arbitration, as practiced in India, became one more “inning” in the game, rather than shortening the lifespan of dispute resolution. Furthermore, the arbitrator and the parties’ counsel saw arbitration as “extra time” or “overtime work” to be completed after attending court proceedings. As a result, the regular session of an arbitration hearing was always brief in duration. The lack of a full-fledged Arbitration Bar effectively precluded continuing day-to-day hearings over typical business hours, i.e. 4-5 hours every day. As a result, the disposal period was extended.

The Law Commission of India issued a report on the 1996 Act’s experience and proposed a number of amendments. The Government of India tabled the Arbitration and Conciliation (Amendment) Bill, 2003, in Parliament based on the Commission’s recommendations. The law ministry’s standing committee believed that the Bill’s provisions allowed for disproportionate court participation in arbitration processes.

6) Mediation Bill, 2021

The Rajya Sabha has introduced the Mediation Bill, 2021, which will be a consolidated Act for the purpose of mediation in India. The Bill aims to promote mediation (including online mediation) and to allow for the enforcement of mediation-related settlement agreements.

It was sent to the Joint Parliamentary Committee for further review. Certain proposals have been made by the Joint Parliamentary Committee. The Committee’s proposals are being actively considered by the Government.

• Applicability

The Bill will apply to mediation proceedings held in India where:

• All parties reside in India, are incorporated there, or have a place of business there,
• the mediation agreement states that mediation will be conducted in accordance with this Bill, or
• there is international mediation (i.e., mediation related to a commercial dispute in which at least one party is a foreign government, a foreign national/resident, or an entity with its place of business outside India).

If a central or state government is a party in certain circumstances, the Bill will only apply to (a) commercial disputes and (b) other disputes as notified by such government.

• Pre-litigation mediation

In the event of a civil or commercial disagreement, a person shall first attempt to resolve the dispute through mediation before addressing any court or certain tribunals as specified.  Even if the parties are unable to reach an agreement through pre-litigation mediation, the court or tribunal may refer the parties to mediation at any point of the proceedings if they desire it.

• Disputes not fit for mediation

Disputes not suitable for mediation include

• pertaining to claims against children or people of unsound mind,
• involving prosecution for criminal offenses,
• influencing third-party rights, and
• relating to the levy or collection of taxes.

The central government may amend this list of disputes.

• Mediation process

Mediation proceedings will be confidential. After the first two mediation sessions, a party may withdraw from the process.  The mediation procedure must be completed within 180 days (even if the parties fail to reach an agreement), which can be extended by the parties for another 180 days.  In the case of court-annexed mediation (mediation conducted at a mediation center established by any court or tribunal), the procedure must be carried out in accordance with Supreme Court or High Court directions or rules.

• Mediators

Mediators can only assist the parties in resolving their issues and cannot force a resolution on them.  Mediators can be appointed by the parties themselves, or by a mediation service provider (an entity that administers mediation).  Mediators must disclose any conflicts of interest that would cast doubt on their impartiality.  The parties can then elect to replace the mediator.

• Mediation Council of India

The Indian government will form the Mediation Council.  The Council will have a chairperson, two full-time members (with mediation or ADR experience), three ex-officio members (including Secretaries in the Ministries of Law, Justice, and Finance), and one part-time member (representing an industry association).  The duties of the Council include (i) mediator registration and (ii) recognizing mediation service providers and mediation institutions (which offer mediation training, education, and certification).

• Mediated settlement agreement 

Mediation agreements must be in writing, signed by the parties, and authenticated by the mediator.  Such agreements will be final, binding, and enforceable in the same way that court judgments are (with the exception of agreements reached through community mediation).  Mediated settlement agreements (other than those achieved through court-ordered mediation, Lok Adalat, or Permanent Lok Adalat) may be challenged only for the following reasons: (i) deception, (ii) corruption, (iii) impersonation, or (iv) relating to conflicts unsuitable for mediation.

• Community mediation

To resolve issues that are likely to disrupt the peace and harmony of a community, community mediation may be sought.  It will be led by a panel of three mediators (who may include community leaders and RWA representatives).

• Interface with other laws 

The Bill will supersede all other mediation laws (save the Legal Services Authorities Act of 1987 and the Industrial Relations Code of 2020).  The Bill also amends several laws (such as the Indian Contract Act of 1872 and the Arbitration and Conciliation Act of 1996).

Types of ADR

Looking at a broader sense, the classification of ADR can be done as:

1. Court-annexed options like Mediation and Conciliation
2. Community-based dispute resolution mechanisms like Lok-Adalat

In India, the following methods of ADR are practiced:

1. Arbitration
2. Mediation
3. Conciliation
4. Negotiation
5. Lok Adalat

• Arbitration

It is a method in which the dispute is brought to an arbitral tribunal, which makes a binding ruling (an “award”) on the matter.

The parties agree to bring their disagreement to a neutral tribunal to determine their rights and obligations when they enter into an arbitration agreement. Arbitration, while commonly referred to as an alternative dispute resolution method, is not the same as mediation or conciliation. A mediator or conciliator can only recommend results, and the parties have the option of accepting or rejecting those recommendations. In contrast, an arbitration panel has the authority to make binding rulings on the parties.

It is a private, often informal, and non-judicial dispute resolution technique. Arbitration must meet four requirements:

1. an arbitration agreement,
2. a dispute,
3. a referral to a third party for adjudication, and
4. an award by a third party.

• Conciliation

Conciliation is a less formal method in comparison to arbitration. This procedure does not necessitate the presence of any prior agreement. Any party may request that the other party appoint a conciliator. A single conciliator is ideal, but two or three are also permitted. When there are numerous conciliators, they must all work together. There can be no conciliation if a party rejects a conciliatory offer.

Parties may provide the conciliator with statements summarising the overall nature of the dispute and the items at issue. When the conciliator believes that settlement elements exist, he may draught settlement terms and send them to the parties for acceptance. If both parties sign the settlement paper, it becomes final and binding on both sides.

• Mediation

Mediation is a process in which an external person called a mediator, who is impartial to the disagreement, is assigned to help the disputant parties in reaching an agreeable settlement.

Mediation can also be referred to as negotiation with the assistance of a third party. In contrast to the arbitrator or judge, the mediator has no authority to force a decision on contending parties.

• Negotiation

Negotiation is the most important mode of dispute settlement since it is a discussion with the objective of persuasion. When compared to processes of using mutual third parties, it has the distinct benefit of letting the parties control the process and the solution themselves.

Negotiation has no statutory recognition in India. Negotiation is the self-counseling of the parties in order to resolve their issue. Negotiation is a process with no set rules but a predictable pattern.

• Lok Adalat

The system of Lok Adalat is constituted under the National Legal Services Authority Act, of 1987. It loosely translates to “people’s court”.

In a society like India, where illiteracy dominated other parts of administration, Lok Adalat was a historical necessity. It was established in 1982, and the first Lok Adalat was established in Gujarat. This movement’s emergence was part of an attempt to reduce the severe pressure on courts with ongoing cases. It was a synthesis of notions such as social justice, fast justice, a negotiated outcome, and negotiating efforts.

Legal Services Authorities Act of 1987:

The Legal Services Authorities Act of 1987 went into effect on November 19, 1995. The purpose of the Act was to provide free and competent legal services to the poorer parts of society in order to ensure that no citizen’s access to justice is denied. The concept of legal services, which includes Lok Adalat, is a major advancement in conflict settlement.

Though conducting Lok Nyayalayas had an impact on settlements prior to this Act, it has received no official acknowledgment. However, under the new Act, a Lok Adalat settlement has the force of a decree and can be enforced through Court as if it were passed by it. Lok Adalat is addressed in sections 19, 20, 21, and 22 of the Act. Section 20 specifies the various scenarios in which matters may be referred for Lok Adalat consideration.

Future prospects of ADR

After a thorough study of ADR, we concluded that it is a vital instrument for resolving conflicts and providing justice in a cost-effective and timely manner.

Because it is an out-of-court settlement, it lets the parties avoid the time-consuming process of litigation while also reducing the tremendous strain on the courts from pending cases.

It can be claimed that ADR is the finest way for settling disputes between parties since, in a developing country like India, where there are many pending cases, the Indian judiciary would gain from the same.

Individuals nowadays find it extremely tiresome to go through the entire litigation procedure in order to obtain justice, and many individuals do not even approach the court due to a lack of money and time. As a result, a move to a technique of dispute settlement that is both amicable and saves time is required.

In other words, litigation is quite complex for the average person, whereas ADR is a client-friendly strategy in which the client fully knows his case and can watch its development.
The evolution of ADR has been drastically seen, and even the Indian legal system is considering the same. This can be seen in different case laws:

• In the case of Emkay Global Financial Service Limited v. Giridhar Sondhi it was held that Arbitration Act aims at a speedy resolution of disputes.
• Supreme Court in the case of Kinnari Mallick and Anr vs. Ghansyam Das Damani held that a court has no jurisdiction for a petition under section 34, and the power of the court is limited. Such power can be invoked before setting aside an award with the consent of one party.
• Again, in another landmark judgment of the Supreme Court the place of proceeding was questioned. In the case of Brahmani River Pellets Limited v. Kamachi Industries Limited, it was held that when parties decide a place of jurisdiction that excludes all
• other court. Exactly when parties decide a place for Arbitration in the contract itself, it excludes the jurisdiction of all other courts.
• In the case of In Konkan Railway Corporation v. Rani Construction Pvt. Ltd it was decided that the court must help the parties in selecting an arbitrator rather than deciding the validity of the arbitration clause.
• B.P. & Co. v. Patel Engineering Ltd. It was held that it is the judiciary power of chief justice while appointing an arbitrator.
• Supreme Court invalidates the discretionary power of the High Court appointing sole arbitrator by stating that appointment must be made according to the arbitration Agreement.
• Supreme court in the case of Vinod Bhaiyalal Jain v. Wadhwani Parmeshwari Cold Storage Pvt. Co., Ltd. Held that there should be no biasness in part of arbitrators in order to deliver proper justice to the partie

Conclusion

As seen above ADR i.e., alternate dispute resolution is now being considered as an important method to solve disputes between the parties due to the number of advantages that it provides.

It helps the parties to solve the disputes without going to the court, in other words, it is an out-of-court settlement method that gives much flexibility to the parties for solving the dispute in accordance with their own terms.

ADR are of various types which again broadens the scope of out-of-court settlement for the parties. The parties can go for Arbitration, Mediation, Negotiation, Conciliation, and Lok-Adalat as it deems fit to them.

Not only have these methods been evolved among people but it has also got the recognition of Indian Legislation and furthermore, it can also be seen in certain judicial precedents as mentions above.

Author: Annika Khurana, a student at New Law College. Pune, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

References:

https://www.law.cornell.edu/

https://ww2.nycourts.gov/

https://www.investopedia.com/

https://www.legalserviceindia.com/

https://www.bamboohr.com/

https://www.manupatrafast.com/