Settling Disputes without Litigation

Introduction

The concept of the Alternative Dispute Resolution (ADR) mechanism is the procedure of settling disputes without litigation and is capable of providing a substitute for the different conventional methods of resolving disputes. ADR offers to sort all types of matters including civil, commercial, industrial, and family, etc., where people are not able to start any sort of negotiation and reach a settlement. Generally, ADR uses a neutral third party who helps the parties to communicate among themselves, discuss the differences, and resolve the dispute. It is a way which enables individuals and groups to maintain cooperation, social order, and provides an opportunity to decrease hostility.

To deal with the situation of pendency of cases in the courts of India, ADR plays an essential role in India by its diverse techniques. Alternative Dispute Resolution mechanism provides scientifically developed techniques to the Indian judiciary, which helps in reducing the burden on the courts. ADR provides modes including, Arbitration, conciliation, mediation, negotiation, and Lok Adalat.

ADR has been also seen in such fundamental rights, Articles 14 and 21, which deals with equality before law and right to life and personal liberty, respectively. ADR’s motive is to provide social-economic and political justice and maintain integrity within the society enshrined in the preamble. ADR also strives to achieve equal justice and free legal aid provided under Article 39-A concerning the Directive Principle of State Policy (DPSP).

It can be alleged that it is a sine qua non of social experience and security of the social order, without which it may be difficult for the individuals to carry on the life together.

Alternative Dispute Resolution (ADR) is a term used to describe different modes of resolving legal disputes. It is experienced by the business world also as common men that it’s impracticable for several individuals to file lawsuits and obtain timely justice. The Courts are being backlogged with dockets leading to delay of a year or more for the parties to have their cases heard and decided after which ADR was introduced to solve the problem of delayed justice.

Impact of ADR in India

Alternative dispute resolution method is increasingly acknowledged in many different fields of law and commercial sectors both at National and International levels. Its diverse methods can help the parties to resolve their disputes at their terms in a not much costly way and even expeditiously. Alternative dispute resolution techniques are in addition to the Courts in character. Alternative dispute resolution techniques are capable of being resolved, under law, by agreement between the parties.

Alternative dispute redressal techniques are employed in several categories of disputes, primarily civil, commercial, industrial, and family conflicts. Studying various reports, it’s found that alternative dispute redressal methods offer the best solution in respect of commercial disputes. The goal of other dispute redressal enshrined in the Indian Constitution’s preamble itself, which forbids the State: “to secure to all the citizens of India, justice-social, economic and political-liberty, equality, and fraternity”.

The Supreme Court said this stage of the affair must be addressed: ‘An independent and efficient judicial system in one of the basic structures of our constitution… It is our Constitutional obligation to ensure that the backlog of cases is declared and efforts are made to increase the disposal of cases. Wide range of processes are defined as alternative dispute redressal process often, dispute resolution process that is alternative to the adjudication through Court proceedings are mentioned as alternative dispute resolution methods.

These methods usually involve a third party. The third party is someone who is neutral, a skilled or talented helper who either assists the parties during dispute or conflict to reach a conclusion by agreement. The alternative dispute resolution mechanism by the very methodology used can preserve and enhance personal and business relationships which may preferably be damaged by the adversarial process. It is also flexible because it allows the parties to choose procedures, which is as per the nature of the dispute and therefore the business context in which it occurs.   

The strategy of ADR may be a push to structure a practical and reasonable alternative to our common legal framework. It is one of the most optimized plans of attack arrangement of administering equity. There are different ADR procedures such as discretion, intercession, assuagement, intervention assertion, small scale preliminary, private judging, last offer mediation, court-added ADR, and rundown jury preliminary.

These methods were created on logical lines in the USA, United Kingdom, France, Canada, China, Japan, South Africa, Australia, and Singapore. ADR has developed as an enormous development in these nations and has not just decreased expense and time taken for resolution of conflicts, yet additionally in giving an amicable climate and a less formal and fewer confounded discussion for various kinds of arguments.

The Arbitration Act, 1940 (An Act to consolidate and amend the law relating to Arbitration) was not meeting the necessities of either the international or local standards of resolving disputes. Huge deferrals and court intervention disappointed the very reason for arbitration as a way for quick resolution of disputes. The Incomparable Court, in a few cases over and again pointed out the need to change the law.

In the conferences of Chief Justices, Chief Ministers, and Law Ministers of all the States, it was chosen that since the entire weight of equity framework cannot be borne by the courts alone, an alternative Dispute Resolution framework needs to be received.

Trade and industry also demanded drastic changes within the 1940 Act. The Legislature of India figured it essential to offer another gathering and methodology for resolving international and residential disputes rapidly.

Along these lines The Arbitration and Conciliation Act, 1996 came into being. The law identifying with Arbitration and Conciliation is almost equivalent to in the propelled nations. Conciliation has been given statutory acknowledgment as a method for settlement of the questions regarding this act. The new act additionally makes sure the freedom and unbiased nature of the authorities regardless of their nationality.

The new Act of 1996 got some changes to facilitate the procedure of arbitration. This enactment created certainty among international gatherings intrigued to place resources into India or to travel for joint ventures, international investment, transfer of technology, and foreign collaborations.

The advantage of ADR is that it’s increasingly adaptable and abstains from trying to find a plan of action to the courts. It is seen that the goals of questions are snappier and fewer expensive through ADR. The gatherings engaged with ADR do not create stressed relations; instead, they continue the proceeds with the connection between themselves.

Modes of ADR

ADR is often broadly classified into two categories: court-annexed options (Mediation, Conciliation) and community-based dispute resolution mechanism (Lok-Adalat).

Following are the modes of ADR, practiced in India:

  • Arbitration
  • Mediation
  • Conciliation
  • Negotiation
  • Lok Adalat

1. Arbitration:

The definition of ‘arbitration’ in Section 2(1) (a) verbatim reproduces the text of Article 2(a) of the Model Law- ‘arbitration means any arbitration whether or not administered by a permanent arbitral institution’. It is a procedure during which the dispute, submitted to an arbitral tribunal which makes a choice (an “award”) on the disagreement that’s binding on the parties.

It is a private, usually unofficial, and nonjudicial trial process for adjudicating disputes. There are four requirements of the concept of arbitration: an arbitration agreement; a dispute; regard to a 3rd party for its determination; and an award by the third party.

The essence lies within the point that it’s a forum chosen by the parties with an intention that it must act judicially after taking under consideration relevant evidence before it and therefore the submission of the parties. Hence it follows that if the forum chosen is not required to act judicially, the process is not arbitration.

Types of arbitration are:

Ad Hoc Arbitration

An ad hoc arbitration is one which is not administered by an institution and therefore, the parties are required to work out all aspects of the arbitration just like the number of arbitrators, manner of their appointment, etc. The parties approach the arbitration during a spirit of cooperation, ad hoc proceedings are often more flexible, cheaper and faster than an administered process. The advantage is that it is agreed to and arranged by the parties themselves. However, ad hoc arbitration is becoming quite an expensive vis-à-vis traditional litigation.

Institutional Arbitration

Institutional arbitration is one in which a specialized institution with a character intervenes and assumes the functions of aiding and administering the arbitral process, according to the rules of that institution. It is vital to notice that these institutions do not mediate the dispute, it’s the arbitrators who arbitrate, and so then the term arbitration institution is inapt, and only the rules of the institution apply.

Incorporation of the book of rules in the “arbitration agreement” is one of the principal advantages of institutional arbitration. Institutional Arbitration, throughout the world, is recognized because of the primary mode of resolution of international commercial disputes.

Statutory Arbitration

When a law specifies that, if a dispute arises during a particular case, it has to be referred to arbitration, the arbitration proceedings are called “statutory arbitration”. Section 2(4) of the Arbitration and Conciliation Act 1996 provides, and except for Section 40(1), Section 41 and Section 43, that the provisions of Part I shall apply to every arbitration under the other activities for the time being in force in India.

Fast track Arbitration

Fast track arbitration is also known as time-bound arbitration, with stricter rules of procedure, which do not allow any laxity for extensions of time, and consequently the resultant delays, and therefore the reduced period, time makes it more cost-effective. Sections 11(2), and 13(2) of the 1996 Act provides that the parties are liberal to agree on a procedure for appointing an arbitrator and choose the fastest manner to challenge an arbitral award respectively. The Indian Council of Arbitration (ICA) has pioneered the concept of fast track arbitration in India and Under its set of laws, parties may request the arbitral tribunal to settle disputes within a fixed timeframe.

2. Mediation:

Mediation is a process during which the mediator, an external person, neutral to the dispute, works with the parties to seek out an answer which is acceptable to all of them. The primary objective of mediation is to provide the parties with a chance to negotiate, converse, and explore options aided by a neutral third party, to determine if a settlement is possible exhaustively.

Mediation is negotiation carried out with the help of a 3rd party. The mediator, in contrast to the arbitrator, has no power to impose an outcome on disputing parties.

Despite the shortage of ‘teeth’ within the mediation process, the involvement of a mediator alters the dynamics of negotiations. The concept of mediation is not foreign to the Indian legal system, as there existed, different aspects of mediation.

The Village Panchayats and the Nyaya Panchayats are good examples of this. A brief perusal of the laws about mediation highlights that it has been primarily confined to commercial transactions. The Arbitration and Conciliation Act, 1996 was framed in such a fashion that it’s concerned mainly with commercial transactions that involve the common man instead of the common man’s interest.

In India, mediation has not yet been popular. One of the explanations for this is that mediation is not a formal proceeding and courts of law cannot enforce it. There is a lack of initiative on the part of the government or the other institutions to take up the explanation of encouraging and spreading awareness to the people at large.

3. Conciliation:

Conciliation is “a process in which a neutral individual meets with the parties to a dispute which might resolve; a relatively unstructured way of dispute resolution in which a third party facilitates communication among different parties in an attempt to help them settle the differences created between them”.

It consists in an effort by a third party, designated by the litigants, to reconcile them either before they resort to litigation (whether to court or arbitration), or after. The attempt to conciliate is based on showing each side the contrary aspects of the dispute, to bring each side together and to achieve a solution.

Section 61 of the 1996 Act provides for conciliation of disputes arising out of a legal relationship, whether contractual or not, and to all or any proceedings relating to it.  After its enactment, there is often no objection, for not permitting the parties to enter into a conciliation agreement regarding the settlement of even future disputes.

4. Negotiation:

Negotiation-communication for persuasion is the pre-eminent mode of dispute resolution. Compared to processes using mutual third parties, its advantage of allowing the parties themselves to regulate the process and the solution.

Essentials of Negotiation are:

  1. It is a communication process;
  2. It resolves conflicts;
  3. It is a voluntary exercise;
  4. It is a non-binding process;
  5. Parties retain control over outcome and procedure;

There is a possibility of achieving ample ranging solutions, and of maximizing joint gains.

In India, Negotiation does not have any statutory recognition. Negotiation is like a self-counseling between the parties to resolve their dispute. Negotiation may be a process that has no fixed rules but follows a predictable pattern.

 5. Lok Adalats:

Lok Adalat was a historic necessity during a country like India where illiteracy dominated other aspects of governance. It was introduced in 1982, and therefore the first Lok Adalat was initiated in Gujarat. The evolution of this movement was a part of the strategy to relieve the heavy burden on courts with pending cases. It was the conglomeration of concepts of social justice, speedy justice, and negotiating efforts.

They cater to the necessity of weaker sections of society. It is an appropriate alternative mechanism to resolve disputes in place of litigation. Lok Adalats have statutory recognition under the Legal Services Authorities Act, 1987. These are being regularly organized primarily by the State Legal Aid and the Advice Boards with the assistance of District Legal Aid and Advice Committees.

Legal Services Authorities Act, 1987:

The Legal Services Authorities Act, 1987 was brought into power on 19 November 1995. The main objective of the Act was to supply free and competent legal services to the weaker sections of the society to make sure that opportunities for securing justice are not denied to any citizen. The concept of legal services which includes Lok Adalat may be a revolutionary evolution of resolution of disputes.

Though the settlement was suffering from conducting Lok Nyayalayas before this Act, an equivalent has not been given any statutory recognition. But under the new Act, an agreement arrived in the Lok Adalats has been given the force of a decree which may be executed through the court as if it is passed by it. Sections 19, 20, 21, and 22 of the Act deals with Lok Adalat. Section 20 provides for various situations where cases are referred for consideration of Lok Adalat.

Honorable Delhi High court has given a landmark conclusion highlighting the importance of the Lok Adalat movement within the case of Abdul Hasan and National Legal Services Authority v. Delhi Vidyut Board and Others[1]. The court passed the order giving directions for fixing permanent Lok Adalats.

Case Laws

ICOMM Tele Ltd. v. Punjab State Water Supply & Sewerage Board and Another[2]

It was thus held that deterring a party to the arbitration from invoking this alternative dispute resolution process by a pre-deposit of 10 percent would discourage arbitration, contrary to the object of de-clogging the Court system, and would render the arbitral process unproductive and expensive.

Convenio Shopping Nine 2 Nine v. Olympia Opaline Owners Association[3]

The High Court of Madras held that a Judicial authority could not suo moto return/reject a suit on the ground that the parties to the lawsuit have agreed that they will arbitration to resolve their dispute. The Court further noted that Amendment Act 2015 retains the need of parties mentioned to Arbitration only upon an application being made by the respondent/defendant, who is a party to the agreement or an individual claiming through or under him.

Damont Developers Pvt. Ltd. v. BRYS Hotels Pvt. Ltd[4]

The High Court of Delhi thus held in the present case, there’s a valid arbitration agreement between the parties contained in Clause 10(e) of the MOU dated 17th September 2016. The petitioner has validly invoked the arbitration vide notice dated 27th September 2018. Under Section 11(6A) of the Arbitration and Conciliation Act, this Court has got to confine only to the existence of an arbitration agreement and everyone other objections including the objection on an insufficient stamping need to be considered by the arbitrator.

Government of Haryana v. G.F. Toll Road Pvt. Ltd[5]

It was held that the objection of reasonable apprehension of bias raised was wholly unsubstantiated, mainly since the nominee arbitrator was a former employee of the State over ten years ago. This cannot disqualify him from acting as an arbitrator. Bare allegations of bias are not a ground on which an arbitrator can be removed.

Zhejiang Bonly Elevator Guide Rail Manufacture Co. Ltd. Vs. Jade Elevator Components[6]

The Apex court, while relying on the aforesaid decision above, observed that emphasis had been laid on the intention of the parties to possess their disputes resolved by arbitration. It has been therefore held that Clause 15 refers to arbitration or court and there’s an option and thus the petitioner has rightly invoked the arbitration clause.

Conclusion

Since its introduction within the Indian Judicial system, has come an extended way. Mediation centers all over the country have opened for fast and effective resolution of disputes. Delhi is one of the cities whose Mediation centre has seen a ton of success stories in the last decade. Delhi has become one among the primary first cities in India to “effectively” reduce its pendency of situations through mediation. The mediation centers in Delhi’s six district courts have settled over 1 lakh cases in the past ten years and have contributed significantly to bringing down the pendency in city courts. A different variety of cases like matrimonial disputes, property rows, minor criminal cases, civil cases, and accident cases, besides old ones and pre-litigation matters, too, are settled by the six mediation centers.

Thus, we can, without a doubt, say that ADR as a dispute resolution process has come a long way and is seeing more and more success stories day by day. It’s a boon to the Judicial system. It’s expected that within the near future mediation and other ADR systems will play an enormous role in fixing the justice delivery system and making it more efficient by solving the arrears of pending cases in which the judiciary is overburdened with at present.

Alternate dispute resolution involves plans of resolving disputes aside from litigation. The methods are in addition to the lawsuit and are by no means intended to replace litigation. Even the strongest proponents of ADR would agree that some issues must be resolved through the courts. However, there are other methods for resolving the dispute which provide many advantages over the adversarial route, which should be explored before litigation is commenced or proceeds too far.

ADR is a process that will either hinder or enhance relationships, organizational behaviors, and company culture depending on how it gets used. When ADRs get used adequately resolutions are met, a closure can happen and all parties involved can feel as though the process was fair, complete, and done in a manner they are comfortable seeing come to an end. Although there are advantages and drawbacks to both arbitration and mediation, all serve a purpose in an area of business, if they are conducted in a right way then a business need not be involved in litigation, lawsuits and potentially loss of employees.

Frequently Asked Questions

  • What is the meaning of Alternate Dispute Resolution?
  • Is the ADR increasing in the field of law? If yes, then How?
  • What are the advantages of ADR that make it different from litigation?
  • Which mode of ADR is mostly opted by the parties of the case?
  • Will ADR change the judiciary system of India?

[1] 1999 IIAD Delhi 105, AIR 1999 Delhi 88, 77 (1999) DLT 640, 1999 (48) DRJ 483

[2] Appeal (Civil), 2713 of 2019, Judgment Date: Mar 11th, 2019

[3] 2019 SCC OnLine Mad 646, Order dated 04-03-2019

[4] Arbitration Petition No. 837/2018

[5] [2019] CIVIL APPEAL NO. 27/2019 (Supreme Court of India)

[6] Arbitration Petition, 22 of 2018, Judgment Date: Sep 14th, 2018

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