DISSERTATION

SUBMITTED IN THE FULFILMENT OF FINAL SUBMISSION TO BE MADE

UNDER CLINICAL COURSE-I IN PURSUANCE OF THE REQUIREMENTS
UNDER THE DEGREE OF BACHELOR OF LAW

Submitted By:
EHTAMAMUL HAQUE
B.A.,L.L.B(H) 4TH YEAR
SELF FINANCE
CLASS ROLL NO. 19

Under the Supervision of:

MR. SUKESH MISHRA
FACULTY OF LAW

JAMIA MILLIA ISLAMIA

NEW DELHI- 110025

2018-19
 LIST OF CONTENTS: Pg

CERTIFICATE……………………………………………………………………………………....
3ACKNOWLEDGEMENT…………………………………………………………………………..
4 TABLE OF
CASES……………………………………………………………………………….5-6
INTRODUCTION………………………………………………………………………………...7-9
OBJECTS/GOALS OF ADR…………………………………………………………………..10-13
ANALYSIS OF …….INDIAN JUDICIARY………………………………………………….14-19
ADR MECHANISM…………………………………………………………………………...32-41
ADR IN INDIA……………………………………………………………………………...…42-45
SUGGESTION FOR IMPROVING MECHANISM…………………………...……………...46-48
ARBITRAL PROCEEDINGS……………………………………………………………….....49-59
CONCLUSION…………………………………………………………………………………….60

BIBLIOGRAPHY……………..……………………………………………………………….61-67

2
 CERTIFICATE

I have the pleasure to certify that EHTAMAMUL HAQUE, a student of FACULTY OF LAW,
JAMIA MILLIA ISLAMIA has pursued her research work and prepared the present dissertation
entitled “ALTERNATE DISPUTE REDRESSAL MECHANISM IN INDIA”.

To the best of my knowledge, the dissertation is the result of her research.

This is being submitted to Faculty of Law, Jamia Millia Islamia in the fulfilment of final
submission of Course work under Clinical Course-I in pursuance of requirements under the 5-yr
degree of Bachelor of Law.

Prof. S.Z Amani Mr. Sukesh Mishra

DEAN Faculty Member,
Faculty of Law, Faculty of Law,
Jamia Millia Islamia. Jamia Millia Islamia.
New Delhi- 110025, New Delhi-110025,
Delhi. Delhi.

3
 ACKNOWLEDGEMENT

This Dissertation is an outcome of study by the author. Any material written by another person that
has been used in this paper has been thoroughly acknowledged.

As my research for this dissertation has concluded, there are a number of people I would like to
thank for this successful attempt.

I thank the esteemed Dean of the Institution, Prof. ​S.Z Amani ​for inculcating the concept of
preparing a Dissertation under the Clinical Course-I and allowing me to present my viewpoints in a
liberal manner. In addition to this, I would like to show my heart-felt gratitude to Mr.​ Sukesh

Mishra​, who undertook the role of a supervisor, mentor an guide for the successful preparation of
this Dissertation.

On a personal level, I would like to extend appreciation towards my family and friends who
supported me throughout.

4
 TABLE OF CASES

● Brij Mohan Lal vs. Union of India & Others (2002-4-Scale-433), May 6, 2002.
● Heyman vs. Darwins Ltd. 1942 AC 356
● Jawaharlal Burman vs. Union of India AIR 1962 SC 378
● Waverly Jute Mills Co. Ltd. vs. Raymon and Co. (India) Ltd. AIR 1962 SC 1810
● Jaikishan Dass Mull vs. Luchhiminarain Kanoria (1974)2 SCC 521
● Union of India vs. m/s. East Coast Boat Builders and Engineers Ltd. 76 (1998) DLT
958
● Olympus Superstructures vs. Meena Vijay Khaitan (1999)5 SCC 651
● Nav Sansad Vihar Coop. Group Housing Society Ltd. (Regd.) vs. Ram Sharma and
Associates MANU/DE/0704/2000
● Konkan Railway Corporation Ltd. vs. Rani Construction Pvt. Ltd. (2002)2 SCC 388
● Pharmaceutical Products of India Ltd. vs. Tata Finance Ltd. (2002)4 AllMR 412
● SBP and Co. vs. Patel Engineering Ltd. (2005)8 SCC 618
● National Agricultural marketing Federation India Ltd. vs. Gains Trading Ltd. (2007)5
SCC 692
● Salem Advocate Bar Association, Tamil Nadu Vs. Union of India (UOI), (2005) 6 SCC
344
● Tamil Nadu Vs. Union of India (UOI), (2005) 6 SCC 344, paras 38, 39
● ONGC Vs. Saw Pipes Ltd. Industrial Disputes Act, 1947
● K.A.AbdulJalees v. T.A.Sahida (2003) 4 SCC 166
● GhanshyamDass v. Domination of India, (1984) 3 SCC 46
● Raghunath Das v. UOI AIR 1969 SC 674
● Oil and Natural Gas Commission v. Collector of Central Excise, 1992 Supp2 SCC 432

5
● Oil and Natural Gas Commission v. Collector of Central Excise, 1995 Supp4 SCC 541
● Chief Conservator of Forests v. Collector, (2003) 3 SCC 472
● Punjab & Sind Bank v. Allahabad Bank. (2006) (3) SCALE 557
● Salem Bar Association vs. Union of India, 2(2005) 6 SCC 344
● Bharat Aluminium v Kaiser Aluminium Technical Services
● Nav Sansad Vihar Coop. Group Housing Society Ltd. (Regd.) vs. Ram Sharma and
Associates
● Subhash Projects and Marketing Ltd. v. South Eastern Coalfields Ltd. AIR 1998 MP
276
● Deepak Galvanising & Engg Industries Pvt Ltd v. Govt. of India
● Continental Construction Ltd. v. NHPC Ltd
● R.P.Souza & Co v. PWD
● Kamla Solvent v. Manipal Finance Corporation Ltd. (AIR 2001 Mad 440).
● BSNL v. Motorola India Pvt Ltd. (2008(3) Arb LR 531)
● Reva Electric Car Co. P. Ltd. v. Green Mobil
● Shree Ram Mills Ltd. v. Utility Premises (P) Ltd., (2007) 4 SCC 599
● Chloro Controls India Private Ltd v. Severn Trent Water Purification Inc., (2013) 1
SCC 641
● Arasmeta Captive Power Company Private Limited v. Lafarge India Private Limited
● National Insurance Company Ltd. v. Boghara Polyfab Pvt. Ltd., (2009) 1 SCC 267

6
 CHAPTER 1
INTRODUCTION

1.1 CONCEPT OF ADR

“Discourage litigation, persuade your neighbours to compromise, whoever you can. Point out,
1
the normal winner is often a real loser in fees, expenses and waste of time,” – Abraham Lincon

Conflicts can always arise between people. Disputes cannot be avoided but can be resolved.
But unfortunately dispute resolution in India is a tiring and a cumbersome process. The judicial
system is time consuming, things are often delayed and postponed which further makes people
suffer. A lot of blood and sweat has to be put in to get justice and a lot of people cannot bear the
burden, they can’t go back and forth in the corridors of the courts. A case is usually brought by the
plaintiff in the court of law , the judge usually hears out the case as in he hears out both the sides
and then decides what has to be done and which party is at fault. Many a times the relationship
between the parties is hardened, it can also be that none of the parties is completely satisfied by the
2
decision of the court. The Times of India, a leading newspaper in its editorial has observed as
follows with regard to delay in delivering judgements by the courts:
“Unless something is done quickly, our dysfunctional legal function will prove to be the
biggest impediment to the country’s growth … a legal system that is drowning in cases and takes
years to deliver verdicts cannot effectively deliver contracts.”
It is actually the duty of the state to guarantee justice to all its citizens. In their monumental
comparative work on civil justice systems, ​Mario Cappelletti and ​Bryant Garth point out that
the emergence of the right of access to justice as “the most basic human right” was in recognition

1
Notes for a Law Lecture- Home Book of American Quotations (by Dodd. Near, New York, 1967, p.226)
2
The Times of India, Editorial, “Stem the Root”, April 22, 2008.

7
of the fact that possession of rights without effective mechanisms for their redressal would be
3
meaningless. All people want is equal access to justice and they want justice to prevail. Beginning
about 1965, in the U.S.A, the U.K and certain European countries, there were three practical
approaches to the notion of access to justice. The ‘first wave’ in this new movement was legal aid,
the second concerned the reforms aimed at providing legal representation for ‘​diffuse’​ interests,
especially in the areas of consumer and environmental protection; and the third, ‘the
access-to-justice approach,’ which includes, but goes much beyond, the earlier approaches, thus
4
representing an attempt to attack access barriers in a more articulate and comprehensive manner.’
There is a need to ameliorate the current situation.

1.2 AIM OF THE RESEARCH

The aim of this study is to analyze the effectiveness, scope and nature of the ADR system in
India and to look into the various modes of settlement of disputes available under the same and
comparing the legality of the existing statutes. This research is focused on Indian legality and how
the burden on the courts can be reduced through ADR system and to make suggestions to build up
an effective and efficient ADR mechanism in India.
The underlined idea of the text is to expose the complex array of dispute resolution processes,
discuss their jurisprudence and highlight the advantages of each of these approaches, generically
known as alternative dispute resolution (ADR). After a general introduction to ADR, the text
provides a comprehensive discussion on the different aspects of law and procedure, in relation to
conduct of arbitration in India and enforcement of foreign arbitral awards. It then deals with the
law and practice of negotiation, mediation, conciliation and the Lok-Adalat. The research also lays
emphasis on the emerging areas in ADR practice in India like court-annexed ADR and ADR in the

3
M. Cappelletti and B. Garth. “Access to Justice-the worldwide movement to make rights effective: a general
report” in M, Cappelletti and B. Garth (eds.), Access to justice- A World Survey, Volume I, Sijthoff and according to
the authors, simultaneous with the emergence in the twentieth century of the “welfare state”.
4
Id. at21. The authors explain (at 49); “We call it the’access-to-justice’ approach because of its overall scope; its
method is not to abandon the techniques of the first two waves of reform, but rather to treat those reforms as but
several of a number of possibilities for improving access.”

8
criminal justice system. It concludes with a critical appraisal of the implementation of ADR over
the past decade and recommends some future steps to strengthen the practice of ADR in India.
1.3 MEANING OF ADR

Alternative Dispute Resolution (ADR) is the procedure for settling disputes without litigation,
such as arbitration, mediation, or negotiation. ADR procedures are usually less costly and more
expeditious. They are increasingly being utilized in disputes that would otherwise result in
litigation, including high-profile labor disputes, divorce actions, and personal injury claims. ​One of
the primary reasons parties may prefer ADR proceedings is that, unlike adversarial litigation, ADR
procedures are often collaborative and allow the parties to understand each other's positions. ADR
also allows the parties to come up with more creative solutions that a court may not be legally
allowed to impose.

Alternative dispute resolution, generally, is a system of dispute resolution which is

non-binding, The expression ‘non-binding’ means that the parties are under no obligation to be
bound by any decision or determination by the third party who acts as mediator / conciliator or
facilitator, unless they enter into a mediated settlement signed by both parties. Thus, ADR does not
5
guarantee a binding result, although it can lead to one. ​Alternative dispute resolution refers to any
methods used to resolve a dispute between parties without resorting to litigation. Alternative
dispute resolution (“ADR”) may make use of a third party, such as a mediator, but it is not
required. One of the benefits of alternative dispute resolution is that it reduces the load on an
overburdened court system. In addition, it is often a less expensive solution for all parties, it has
gained broad acceptance in the business and legal community. In fact, courts in some jurisdictions
require parties to engage in some type of ADR before the matter can proceed to trial. To explore
this concept, consider the following ​alternative dispute resolution​ definition.

5
Indu Malhotra and O.P Malhotra, The Law and Practice of Arbitration and Conciliation,2​nd​ edn., 2006, p. 1787.

9
 CHAPTER 2
OBJECTS OR GOALS OF ALTERNATIVE DISPUTE RESOLUTION

Alternative dispute Resolution methods are being increasingly acknowledged in the field of
law and commercial sectors both at National and International levels. Its diverse methods can help
the parties to resolve their disputes at their own terms cheaply and expeditiously. Alternative
dispute Resolution techniques are in addition to the Courts in character. Alternative dispute
Resolution techniques can be used in almost all contentious matters, which are capable of being
resolved, under law, by agreement between the parties. Alternative dispute Resolution techniques
can be employed in several categories of disputes, especially civil, commercial, industrial and
6
family disputes . From the study of the different alternative dispute Resolution techniques in the
proceeding chapters it is found that, alternative dispute Resolution methods offer the best solution
in respect of commercial disputes where the economic growth of the Country rests. ​Alternative
Dispute Resolution originated in the USA (United States of America) in a drive to find alternatives
to the traditional legal system, felt to be adversarial, costly, unpredictable, rigid, over
professionalized, damaging to relationships, and limited to narrow rights based remedies as
opposed to creative problem solving. The American origins of the concept are not surprising, given
certain features of litigation in that system, such as: trials of civil actions by a jury, lawyers'
contingency fees, lack of application in full of the rule "the loser pays the costs”.

Actually informal dispute resolution has a long tradition in many of the world societies dating
back to 12th century in China, England and America. The business world has rightly recognized

6
Hindu Marriage Act 1955, Industrial Disputes Act 1947, The Code of Civil Procedure, The Family Courts Act 1984

10
the advantages that the alternative dispute resolution in one of or other is a right solution. It is felt
that it is less costly, less adversarial and thus more conducive to the preservation of business
relationship which is of vital importance in the business world. The use of alternative dispute
resolution has grown tremendously in the international business field in recent years. The growth
has been permitted by several factors including tremendous expansion of international commerce
and the recognition of global economy. Many governments around the world have supported the
demand for alternative dispute resolution as an efficacious way of handling international
commercial disputes. We find that alternative dispute resolution has also become a common
provision in United States trade treaties and the United State has been the strongest supporter of
international commercial alternative dispute resolution. Many experts in this field are of the strong
opinion that the impact of alternative dispute resolution on international commerce is great and
will continue to expand. Numbers of alternative dispute resolution institutions are being
established. ​In this background, the necessity for setting up the International Centre for Alternative
Dispute Resolution, though was felt for quite some time, came to be true by the inauguration of the
International Centre in India.
In developing countries where most people opt for litigation to resolve disputes, there is
excessive over-burdening of courts and a large number of pending cases, which has ultimately lead
to dissatisfaction among people regarding the judicial system and its ability to dispense justice.
This opinion is generated largely on the basis of the popular belief, “Justice delayed is justice
denied”. However, the blame for the large number of pending cases in these developing countries
or docket explosion, as it is called, cannot be attributed to the Courts alone. The reason for it being
the non-implementation of negotiation processes before litigation. It is against this backdrop that
the mechanisms of alternative dispute resolution are being introduced in these countries. These
mechanisms, which have been working effectively in providing an amicable and speedy solution
for conflicts in developed economies, are being suitably amended and incorporated in the
developing countries in order to strengthen the judicial system. ​Many countries such as India,
Bangladesh and Sri Lanka have adopted the alternative dispute resolution mechanism. Alternative
Dispute Resolution in India is an attempt made by the legislators and judiciary alike to achieve the
“Constitutional goal” of achieving Complete Justice in India. Alternative Dispute Resolution first

11
started as a quest to find solutions to the perplexing problem of the ever increasing burden on the
courts. A thought-process that started off to rectify docket explosion, later developed into a
separate field solely catering to various kinds of mechanisms which would resolve disputes
without approaching the Formal Legal System. The reasoning given to these alternative dispute
resolution mechanisms is that the society, state and the party to the dispute are equally under an
obligation to resolve the dispute as soon as possible before it disturbs the peace in the family,
business community, society or ultimately humanity as a whole. In a civilized society, principles of
natural justice along with the “Rule of Law” should result in complete justice in case of a dispute.
Rule of Law is defined as the state of order in which events conform to the law. It is an
authoritative, legal doctrine, principle, or precept applied to the facts of an appropriate case. These
definitions give us the indication that the Rule of Law is an authoritative concept which might lead
to a win-lose situation in cases of dispute. Therefore, alternative dispute resolution uses the
principles of natural justice in consonance with the Rule of Law, in order to create a favorable
atmosphere of a win-win situation. ​This is much needed in countries like India where litigation
causes a great deal of animosity between the parties due to the agony caused by the longstanding
7
litigation. Alternative Dispute Resolution, thus, gains its momentum in India today. ​In India,
adversary method of resolving a dispute is predominantly followed. The Britishers primarily
introduced this method of resolving the disputes for the first time in India. In this method, the
parties to the dispute compete with each other to get a favorable decision. This leads to win or lose
situation between the litigants ensuing animosity between them. Hence, the shortcoming of such a
system is that the congenial atmosphere of the society is said to be affected. The Society makes
efforts to control the dispute and the conflict, but irony is that the society, itself has created
situation that leads to the dispute and perhaps cannot avoid doing so. By assigning different status
to different occupations, society has laid the basis for jealousy, greed and resentments. By giving
authority to one person over the other, society opens the doors for abuse of authority and
consequently relation. By creating ends that are competitive, society makes it possible for
competition to take the form of dispute. Despite some of its negative effects of litigations it cannot
be denied that it is one of the most reliable sources of resolution of dispute among the public and

7
http://www.icadr.org/news-speechcjhc.html

12
has proved to be an outstanding method to the satisfaction of everyone. It is a unifying factor,
which handles the disputes in accordance with uniform national standard. This is the reason why it
is still functioning as a primary source of resolution of the dispute among the people.

In India, the quest for justice has been an ideal, which the citizens have been aspiring for
generations down the line. Our Constitution reflects this aspiration in the Preamble itself, which
speaks about justice in all its forms: social, economic and political. Justice is a constitutional
mandate. About half a century of the Constitution at work has tossed up many issues relating to the
working of the judiciary; the most important being court clogging and judicial delays. Particularly
disturbing has been the chronic and recurrent theme of a near collapse of the judicial trial system,
its delays and mounting costs. Here, the glorious uncertainties of the law frustrated the aspirations
for an equal, predictable and affordable justice is also a question, which crops up often in the
minds of the people.

The goal of Alternative Dispute Resolution is enshrined in the Indian Constitution’s preamble
itself, which enjoins the State: “to secure to all the citizens of India, justice-social, economic, and
8
political— liberty, equality, and fraternity. Alternative Dispute Resolution in India was founded
on the Constitutional basis of Articles 14 and 21 which deal with Equality before Law and Right to
life and personal liberty respectively. ​These Articles are enshrined under Part III of the
Constitution of India which lists the Fundamental Rights of the citizens of India. Alternative
Dispute Resolution also tries to achieve the Directive Principle of State Policy relating to Equal
justice and Free Legal Aid as laid down under Article 39-A of the Constitution. The Acts which
deal with Alternative Dispute Resolution are Arbitration and Conciliation Act, 1996 (discussed in
detail later) and the Legal Services Authorities Act, 1987. Section 89 of the Civil Procedure Code,
1908 makes it possible for Arbitration proceedings to take place in accordance with the Acts stated
above. The Legal Services Authorities Act, 1987 has also been amended from time to time to
endorse use of alternative dispute resolution methods. Section89 of the Code of Civil Procedure as
amended in 2002 has introduced conciliation, mediation and pre-trial settlement methodologies for

8
The Preamble of Indian Constitution.

13
effective resolution of disputes. Mediation, Conciliation, Negotiation, Mini-Trial, Consumer
Forums, Lok Adalat’s and Banking Ombudsman have already been accepted and recognized as
effective Alternative dispute resolution methodologies.

CHAPTER 3
NEEDS FOR ALTERNATIVE DISPUTE RESOLUTION

A consequence of the judicial model is that the solution may not be well adapted to the parties’
needs and interests. The range of remedies available to the court is limited. An apology or
acknowledgment of fault may not be awarded. The court is not in a position to try to salvage a
relationship, whether it is commercial or domestic. The court’s decision is also binary in nature,
one is right and one is wrong. This polarizes the parties, creates the need for self-justification and
escalates the dispute into an emotionally charged process. Alternative dispute resolution offers
efficiency and can enhance the quality of dispute resolution by permitting a wider array of
outcomes and more client participation. Alternative dispute resolution is growing nationwide,
providing individuals and businesses with cheaper, faster ways to resolve disputes.

Our courts follow the adversarial method of adjudication, which uses a neutral decision-maker
(judge) who adjudicates disputes after they have been aired by the adversaries in contested
proceedings. Alternative methods of disputes resolution, by contrast, are generally supposed to be
less adversarial and reach speedier results because the neutral person may help to formulate the
result while the process is under way. The basic difference between adversarial and
non-adversarial methods of dispute resolution is as follows: In adversarial system disputant wins,
the other must lose and disputes are resolved by a third party through application of some principle
of law. on the other hand, in the case of alternative dispute resolution all the parties can benefit
through a creative solution to which each agrees and the situation is unique and therefore, need not

14
be governed by any general principle except to the extent that the parties accept it. The parties
know the facts and where their economic interests lie far better than any decision-making tribunal
would. The solution crafted by the parties clearly spells out their respective rights and obligations,
binds both sides, and is enforceable.

It is important to distinguish between binding and non-binding forms of Alternative Dispute

Resolution. Negotiation, mediation and conciliation are non-binding forms, and depend on the
willingness of parties to reach a voluntary agreement. Arbitration programs may be binding or
non-binding. Binding Arbitration produces a third party decision that the disputants must follow
even if they disagree with the result much like a judicial decision. Non-binding Arbitration
produces a third party decision that the parties may reject. It is also important to distinguish
between mandatory processes and voluntary processes. Some judicial systems require the parties to
negotiate, conciliate, mediate or arbitrate, prior to court action. Alternative Dispute Resolution
processes may also be required as part of prior contractual agreement between parties. In voluntary
processes, submission of a dispute to an alternative dispute resolution process depends entirely on
the will of the parties.

The ultimate goal of alternative dispute resolution systems is to resolve disputes and arrive at a
consensus – a mutually acceptable agreement that takes into consideration the interests of all
concerned parties. A settlement or agreement reached through consensus may not satisfy each
participant’s interests equally or receive a similar level of support from all participants. Yet, for
reasons of practicability, it finds acceptable. There are several reasons why attention must be given
to alternate disputes resolution, the first of which though not in the order of importance is the
unsuitability of uniform court procedures to one and everything. To illustrate, for the ailment in
question, if the Allopathic system of medicine is unsuitable, or the patient’s is sensitive/ allergic to
those drugs, or the strain of organism is resistant to known medicines, one must look to the
Ayurvedic or Homeopathic form of medicine, or even plain Nature Cure. However, if the main
Allopathic system is suitable, but the queue outside the public dispensary or the wait for the
medication is so long that a person is not likely to survive the wait, a look at the alternative

15
systems becomes imperative. ​These alternative systems are then resorted to not because of the
comparative efficacy of the alternative system, but because of the inefficiency and inability as
9
distinct from suitability of the main system to do its task and serve the purpose. Alternative
dispute resolution by reason of its operational mechanics which revolve around informal
discussions and exchange of thoughts as also listening to the other provides a greater opportunity
to each to realize where the correct right, entitlement or liability lies. There is re-verification of
perceptions and correction of any ‘errors’ therein.

Alternative dispute resolution is also suitable, in fact require, where factors of confidentiality
and privacy come into play. Family disputes are one and business disputes are another. Privacy
apart, alternative dispute resolution is best suited for disputes where the parties are having some
permanent relationship or ties, viz., family members, trade partners, employer-employee, etc. In
such disputes, though the Court would render a decision as per law, it would leave the parties with
a strained relationship. These disputes, more than ‘resolution’, need a ‘solution’, which can only
come through alternative dispute resolution and not from a court.
The International Centre is intended to spread alternative dispute resolution concept effectively
throughout the country. The main objectives of the Centre are:

(1) to propagate, promote and popularise the settlement of domestic and international
disputes by different modes of alternative dispute resolution;
(2) to provide facilities and alternative and other support services for holding conciliation,
mediation, mini-trials and arbitration proceedings;
(3) to promote reform in the system of settlement of disputes and its healthy development
suitable to the social, economic and other needs of the community;
(4) to appoint conciliators, mediators, arbitrators, etc., when so requested by the parties;
(5) to undertake teaching in alternative dispute resolution and related matters and to award
diplomas, certificates and other academic or professional distinction;

9
Justice, Courts and Delays, by Dr. Arun Mohan, at p.g. no. 1944.

16
(6) to develop infrastructure for education, research and training in the field of alternative
dispute resolution;
(7) to impart training in alternative dispute resolution and related matters and to arrange
for fellowship, scholarship, stipends and prizes.

Another reason why Alternative resolution system needs attention is that it is in the interest of
the parties that instead of trying to achieve more and sufficient accuracy and facing delays in
process, the matter is decided expeditiously, even if it means sacrificing accuracy or leaving
some degree of error. This would even include deciding appeals and overriding all technical
objections in the way of execution, as the injury in term of time and money loss would be far
greater than the ‘difference’. Further in any adjudication, there is an inevitable component of
error in or what should be the perfect result. The endeavor for perfect accuracy is not always
worth it. In any case, it is a balance between five factors, namely:
(1)Depth of procedures;
(2)Expenses;
(3)Time taken/speed (or avoiding delays);
(4)Accuracy that has to be arrived at/ achieved; and
10
(5)Individual placements of each party

The time it takes to decide a dispute has its own importance which must not be overlooked and
this operates in several ways. The continuing uncertainty, consumption of mental energy, and
other expenses towards the continuing litigations take a greater toll than generally thought of.
In this context, time means normal or reasonable time and not anything beyond that.
Otherwise, it ceases to be justice and becomes ‘coercion into submission’ by reason of delay.
Therefore, while considering alternative dispute resolution, the wall calendar, if not the hour
glass, must be kept in the forefront. Often, there is litigation where every month’s delay causes
huge losses and even if one is ultimately successful, those losses cannot be really compensated.

10
Alternative Disputes Resolution, by Dr. Arun Mohan p.g. no. 1945.

17
Principle behind alternative dispute resolution in the context of how disputes arise, the needs,
desires, hopes and fears of the parties that lead them to take a particular position are generally
referred to as the partiers’ interests and serve as the influencing factor. They are the reasons, or
underlying needs and concerns that motivate people to ask for certain outcomes. Further, there
is, generally, also a component of error in perception of rights and obligations.

The Arbitration and Conciliation act passed in 1996 ensures high validity for these settlements.
Section 34 and 35 of the act says that the Arbitration award shall be binding and final to the
parties and person claiming under them. A recourse to a court against an arbitral award may be
made only on a few circumstances like when a matter is decided beyond the scope of
arbitration or, the procedures was not in accordance with the agreement between the parties;
and only if the disputed party approach the court within 90 days from the date of arbitral
award. Except that, section 36 says, “the award shall be enforced under the Code of Civil
Procedure 1908 (5 of 1908) in the same manner as if it were a decree of a court” About a
Mediation settlement: Section 74 says, “the settlement agreement shall have the same status
and effect as it is an arbitral award on agreed terms of the substance of the dispute rendered by
an arbitral tribunal”.

Even though the Arbitration & Conciliation Act, 1996 was enacted to give impetus to
conciliation and giving statutory recognition to conciliated settlements, giving the same status
of a court decree for its execution, no real effort was taken by the courts or by the lawyers to
utilize the provisions and encourage the litigants to choose the method. ​Even though some
mediation training and familiarization programs were conducted it did not create the real
effect.

The amendment of the Code of Civil Procedure referring pending court matters to alternate
dispute resolution was not welcomed by a group of lawyers and the amendment was
challenged. The modalities to be formulated for effective implementation of Sec. 89 also came
under scrutiny. For this purpose a Committee headed by former judge of the Supreme Court

18
and Chairman of the Law Commission of India, Justice M. Jagannadha Rao was constituted to
ensure that the amendments become effective and result in quick dispensation of justice. The
Committee filed its report and it was accepted and, the Hon’ble Supreme Court of India has
pronounced a landmark decision (02/08/2005) “Salem Advocate Bar Association, Tamil Nadu
11
v. Union of India ” where it held that reference to mediation, conciliation and arbitration are
mandatory for court matters. This judgment of the Supreme Court of India will be the real
turning point for the development of mediation in India. But the growth of mediation should be
carefully moulded so that the system gains the faith and recognition of the litigants.

Even though arbitration was to a certain extend accepted by the business world and corporate,
the scope of mediation and its benefits has not yet been explored and utilised. The main reason
may be the doubt about the validity of such a settlement as compared to a court decree. The
respective sections of the Arbitration and Conciliation act referred earlier clears that doubt.
Another major setback in the development of Mediation in India was the unavailability of
internationally trained Professional Mediators. It is well accepted that if a dispute arise
regarding medical field, a trained mediator with a medical background can settle the matter
better; same is the case regarding a financial dispute or an industrial dispute; a mediator with a
relevant back ground may settle the issues easier. This chance was utilised by developed
countries like USA, UK Australia etc. as they have got mediators with professional background
other than law.

11
JT 2010 (7) SC 616, (2010) 8 Supreme Court Cases 24

19
 CHAPTER 4
AN ANALYSIS ON EVOLUTION OF ALTERNATIVE DISPUTE
RESOLUTION MECHANISMS IN INDIAN JUDICIARY:

The Law Commission of Indian has maintained that, the reason for judicial delay is not a lack
of clear procedural laws, but rather the imperfect execution, or even utter non-observance,
12
thereof. The Law Commission of Indian in its 14th Report categorically stated that, the delay
results not from the procedure lay down by the legislations but by reason of the
non-observance of many of its important provisions particularly those intended to expedite the
disposal of proceedings. Given the huge number of pending cases, the governance and
administrative control over judicial institutions through manual processes has become
13
extremely difficult. The Supreme Court made it clear that this state of affairs must be
addressed: “An independent and efficient judicial system is one of the basic structures of our
Constitution…It is our Constitutional obligation to ensure that the backlog of cases is
14
decreased and efforts are made to increase the disposal of cases.

12
Law Commission of India, 77th Report, pr.4.1..
13
In all, 33,79,033 cases are pending before the High Courts. As on December 31, 2004, the total number of civil
cases pending before the subordinate judiciary is 82,36,254 and criminal cases pending are 1,95,85,776. The total
pendency thus is 2,78,22,030. This shows that out of the total national pendency at the subordinate Courts level,
70% is criminal cases and the remaining is civil cases. The total number of district and subordinate Courts are 12,401.
These Courts are located in 2,066 towns.
14
Brij Mohan LalVs. Union of India & Others (2002-4-Scale-433), May 6, 2002.

20
The analysis of the Law Commission of India reports sheds light on the factors contributing
towards delays and huge backlog of cases before the Courts. The prominent contributory
15
factors are the frequent adjournments at the instance of the clients and lawyers , the boycotts
16
of the Courts by the lawyers, shortage of presiding officers of the Tribunals and Courts , lack
17
of adherence to basic procedures and principles of case management and disposal. The
Government is also known to be a huge contributor to delays, in matters where it is a party at
various stages from evading notices, replying to notices and replying without application of
18
mind, unnecessarily appealing even when the laws are clearly in favour of the other side. The
improper management of Court diary, absence of strict compliance with the provisions of Code
of Civil Procedure such as, provisions of the Order 10 Code of Civil Procedure relating to
examination of parties before framing issues, to ensure narrowing and focusing the area of
controversy, the laxity in enforcing the provisions of Order 8, R 1, Code of Civil Procedure by
allowing repeated adjournments with Order 17, Rule 1, Code of Civil Procedure to be read
with the proviso to Order 17, Rule 2 where Clause (b) for giving adjournments also are the
prominent contributors to the problem of delays and the resultant judicial arrears. The Code of
Civil Procedure (Amendment Act) 2002, Act No. 22 was sought to bring a change in the
procedure in suits and civil proceedings by way of reducing delays and compressing them into
a year's time from institution of suit till disposal and delivery of judgment, yet the revised
procedures are also not strictly adhered to. As a result, the time taken in the final disposal of
the cases by the Courts still runs into years by unduly lengthy and winded examination and
19 20
crossexamination of witnesses, protracted arguments , inadequate electronic connectivity and
use of information technology and so forth. The problem judicial delay and judicial arrears are
spreading like epidemic at every level of the judicial system and thus it is a major cause of
concern for the very survival of the entire process of litigation.

15
Salem Advocate Bar Association, Tamil Nadu Vs. Union of India (UOI), (2005) 6 SCC 344
16
120th Law Commission Report (1987)
17
77th Law Commission Report (1978)
18
Tamil Nadu Vs. Union of India (UOI), (2005) 6 SCC 344, paras 38, 39
19
The 14th and 77th Law Commission Reports.
20
79th Law Commission Report (1979) on delays and arrears.

21
Alternative dispute resolution was at one point of time considered to be a voluntary act on the
apart of the parties which has obtained statutory recognition in terms of Code of Civil
Procedure Amendment Act, 1999, Arbitration and Conciliation Act, 1996, Legal Services
Authorities Act, 1997 and Legal Services Authorities (Amendment) Act, 2002. The Parliament
apart from litigants and the general public as also the statutory authorities Like Legal Services
Authority have now thrown the ball into the court of the judiciary. What therefore, now is
required would be implementation of the Parliamentary object. The access to justice is a human
right and fair trial is also a human right. In some countries trial within a reasonable time is a
part of the human right legislation. But, in our country, it is a Constitutional obligation in terms
of Article 14 and 21. Recourse to alternative dispute resolution as a means to have access to
justice may, therefore, have to be considered as a human right problem. Considered in that
context the judiciary will have an important role to play.

Even before the existence of Section 89 of the Civil Procedure Code, there were various
provisions that gave the power to the courts to refer disputes to mediation, which sadly have
not really been utilized. Such provisions, inter alia, are in the Industrial Disputes Act, the
Hindu Marriage Act and the Family Courts Act and also present in a very nascent form via
Section 80, Order 32 A and Rule 5 B of Order 27 of the Code of Civil Procedure. A trend of
this line of thought can also be seen in ONGC Vs. Western Co. of Northern America and
ONGC Vs. Saw Pipes Ltd. Industrial Disputes Act, 1947 provides the provision both for
conciliation and arbitration for the purpose of settlement of disputes. Section 23(2) of the
Hindu Marriage Act, 1955 mandates the duty on the court that before granting relief under this
Act, the Court shall in the first instance, make an endeavor to bring about a reconciliation
between the parties, where it is possible according to nature and circumstances of the case.

For the purpose of reconciliation the Court may adjourn the proceeding for a reasonable period
and refer the matter to person nominated by court or parties with the direction to report to the
court as to the result of the reconciliation. [Section 23(3) of the Act].

22
The Family Court Act, 1984 was enacted to provide for the establishment of Family Courts
with a view to promote conciliation in, and secure speedy settlement of, disputes relating to
marriage and family affairs and for matter connected therewith by adopting an approach
21
radically different from that ordinary civil proceedings. Section 9 of the Family Courts Act,
1984 lays down the duty of the family Court to assist and persuade the parties, at first instance,
in arriving at a settlement in respect of subject matter. The Family Court has also been
conferred with the power to adjourn the proceedings for any reasonable period to enable
attempts to be made to effect settlement if there is a reasonable possibility.

Section 80(1) of Code of Civil Procedure lays down that no suit shall be instituted against
government or public officer unless a notice has been delivered at the government office
stating the cause of action, name, etc. The object of Section 80 of Code of Civil Procedure –
the whole object of serving notice u/s 80 is to give the government sufficient warning of the
case which is of going to be instituted against it and that the government, if it so wished can
22
settle the claim without litigation or afford restitution without recourse to a court of laws.

The object of section 80 is to give the government the opportunity to consider its or his legal
23
position and if that course if justified to make amends or settle the claim out of court. Order
23 Rule 3 of Code of Civil Procedure is a provision for making a decree on any lawful
agreement or compromise between the parties during the pendency of the suit by which claim
is satisfied or adjusted. The scheme of Rule 3 of Order 23 proves that if the court is satisfied
that a suit has been adjusted wholly or partly by and lawful agreement or compromise, the
court shall pass a decree in accordance to that. Order 23, Rule 3 gives mandate to the Court to
record a lawful adjustment or compromise and pass a decree in term of such compromise or
adjustment.

21
K.A.AbdulJalees v. T.A.Sahida (2003) 4 SCC 166
22
GhanshyamDass v. Domination of India, (1984) 3 SCC 46
23
Raghunath Das v. UOI AIR 1969 SC 674

23
Order 27 Rule 5B confers a duty on court in suit against the government or a public officer to
assist in arriving at a settlement. In a suit where Government or public officer is a party it shall
be the duty of the Court to make an endeavor at first instance, where it is possible according to
the nature of the case, to assist the parties in arriving at a settlement. If it appears to the court in
any stage of the proceedings that there is a reasonable possibility of a settlement, the court may
adjourn the proceeding to enable attempts to be made to effect settlement.

Order 32A of Code of Civil Procedure lays down the provision relating to “suits relating to
matter concerning the family”. It was felt that ordinary judicial procedure is not ideally suited
to the sensitive area of personal relationships. Litigations involving affairs of the family seem
to require special approach in view of the serious emotional aspects involved. In this
circumstances, the objective of family counseling as a method of achieving the object of
preservation of family should be kept in forefront. Therefore, Order 32A seeks to highlight the
need for adopting a different approach where matters concerning the family are at issue,
including the need for effort to bring about amicable settlement.

The provisions of this Order applies to all proceedings relating to family, like guardianship,
custody of minor, maintenance, wills, succession, etc., Rule 3 imposes a duty on the Court to
make an effort of settlement by way of providing assistance where it is possible to do so. The
Court may also adjourns the proceeding if it thinks fir to enable attempt to be made to effect a
settlement where there is a reasonable possibility of settlement. In discharge of this duty Court
may take assistance of welfare expert who is engaged in promoting the welfare of the
family.[Rule 4]

The concept of employing alternative dispute resolution has undergone a sea change with the
insertion of S.89 of Code of Civil Procedure by amendment in 2002. As regards the actual
content, s.89 of Code of Civil Procedure lays down that where it appears to the court that there
exists element of settlement, which may be acceptable to the parties, the Court shall formulate
the terms of the settlement and give them to the parties for their comments. On receiving the

24
 response from the parties, the Court may formulate the possible settlement and refer it to
either:- Arbitration, Conciliation; Judicial Settlement including settlement through Lok
Adalats; or Mediation. As per sub-section (2) of Section 89, when a dispute is referred to
arbitration and conciliation, the provisions of Arbitration and Conciliation Act will apply.
When the Court refers the dispute of Lok Adalats for settlement by an institution or person, the
Legal Services Authorities, Act, 1987 alone shall apply.

Supreme Court started issuing various directions as so as to see that the public sector
undertakings of the Central Govt. and their counterparts in the States should not fight their
litigation in court by spending money on fees on counsel, court fees, procedural expenses and
24
waiting public time.

25
In ONGC v. Collector of Central Excise , there was a dispute between the public sector
undertaking and Government of India involving principles to be examined at the highest
governmental level. Court held it should not be brought before the Court wasting public money
any time.

26
In ONGC v. Collector of Central Excise, dispute was between government department and
PSU. Report was submitted by cabinet secretary pursuant to Supreme Court order indicating
that an instruction has been issued to all departments. It was held that public undertaking to
resolve the disputes amicably by mutual consultation in or through or good offices empowered
agencies of govt. or arbitration avoiding litigation. Government of India directed to constitute a
committee consisting of representatives of different departments. To monitor such disputes and
to ensure that no litigation comes to court or tribunal without the Committee’s prior
examination and clearance. The order was directed to communicate to every High Court for
information to all subordinate courts.

24
see Oil and Natural Gas Commission v. Collector of Central Excise, 1992 Supp2 SCC 432, Oil and Natural Gas
Commission v. Collector of Central Excise, 1995 Supp4 SCC 541 and Chief Conservator of Forests v. Collector, (2003) 3
SCC 472
25
1992 Supp2 SCC 432,[ ONGC I]
26
1995 Supp4 SCC 541 (ONGC II)

25
 27
In Chief Conservator of Forests v. Collector were relied on and it was said that state/union
govt. must evolve a mechanism for resolving interdepartmental controversies- disputes
between department of Government cannot be contested in court.

28
In Punjab & Sind Bank v. Allahabad Bank, it was held that the direction of the Supreme
29
Court in ONGC III to the government to setup committee to monitor disputes between
government departments and public sector undertakings make it clear that the machinery
contemplated is only to ensure that no litigation comes to court without the parties having had
an opportunity of conciliation before an in-house committee.

30
In the judgment of the Supreme Court of India in Salem Bar Association vs. Union of India ,
the Supreme Court has requested prepare model rules for Alternative Dispute Resolution and
also draft rules of mediation under section 89(2)(d) of Code of Civil Procedure, 1908. The rule
is framed as “Alternative Dispute Resolution and Mediation Rules, 2003”.

Rule 4 of the Alternative Dispute Resolution and Mediation Rules, 2003”, lays down that the
Court has to give guidance to parties (when parties are opting for any mode of Alternative
Dispute Resolution) by drawing their attention to the relevant factors which parties will have to
take into account, before they exercise their opinion as to the particular mode of settlement,
namely;
(i) It will be to the advantage of the parties, so far as time and expense are concerned, to
opt for one of these modes of settlement rather than seek a trial on the disputes arising
in the suit;
(ii) Where there is no relation between the parties which requires to be preserved, it will be
in the interests of the parties to seek reference of the matter to arbitration as envisaged
in clause (1) of sub-section (1) of sec.89.

27
(2003) 3 SCC 472 ONGC I AND II
28
(2006) (3) SCALE 557
29
(2004) 6 SCC 437
30
2(2005) 6 SCC 344

26
 (iii) Where there is a relationships between the parties which requires to be preserved, it will
be in the interests of the parties to seek reference of the matter to conciliation or
mediation, as envisaged in clauses (b) or (d) of sub-section (1) of sec.89. The Rule also
says that Disputes are arising in matrimonial, maintenance and child custody matters
shall, among others, be treated as cases where a relationship between the parties has to
be preserved.
(iv) where parties are interested in a final settlement which may lead to a compromise, it
will be in the interests of the parties to seek reference of the matter to judicial
settlement including Lok Adalat as envisaged in clause (c) of sub-section(1) of section
89.

According to Rule 8, the provisions of these Rules may be applied to proceedings before the
Courts, including Family courts constituted under the Family Courts (66 of 1984), while dealing
with matrimonial, and child custody disputes.

There is need for greater use of alternate dispute resolution. Alternative dispute resolution is
required when there is need for (i) going into lesser depth of procedures, or more informal and less
technical procedures, or special procedures; (ii) the decision-maker or facilitator to be familiar
with the or otherwise conversant with the subject. In many technical matters, it eliminates the need
to give evidence or even ‘educate’ the decision-maker thereby enabling lesser costs, and greater
speed and accuracy; and (iii) adopting and encouraging ‘give and take’ by each. This occurs in
many situations, particularly where reasoning/ moral justification advanced by one is likely to
persuade the other to more readily relent. It is wrong to send parties to alternative dispute
resolution simply because the courts are not able to decide the cases in a reasonable time. The
principle behind alternative dispute resolution as also the need thereof must be understood in its
correct perspective. To emphasize further, pressing for alternative dispute resolution systems
without first resolving the problem of delays before the courts is only driving people to alternative
dispute resolution out to helplessness and giving them a feeling that “It takes so long for the court
to decide and the cost of attending to all the hearings is so much that it is as good as justice denied.

27
So whatever little alternative dispute resolution has to offer, we might as well accept, and more
than that, we cannot except”. Although alternative dispute resolution systems are essential, and
great attention and effort must go towards them to make successful, it is necessary that apart from
many other factors, improvement in the functioning of the courts is brought first. Thereafter
alternative dispute resolution be encouraged, but confined to matters where it is more suitable/
appropriate as compared to the ’efficient and proper’ court procedures. It should not merely be
regarded as an escape route form the inability of the courts to dispense justice in time.

4.1 ADVANTAGES OF ALTERNATIVE DISPUTE RESOLUTION:

The benefits or advantages that can be accomplished by the alternative dispute resolution
system are summed up here briefly:
1. The concept of Alternative Dispute Resolution is usually thought of as a voluntary
chosen by the parties because of its greater efficacy and economy.

2. Wide range of process are defined as alternative dispute resolution process often,
dispute resolution process that are alternative to the adjudication through Court
proceedings are referred to as alternative dispute resolution methods. These methods
usually involve a third party referred to as neutral, a skilled helper who either assists the
parties in a dispute or conflict to reach at a decision by agreement or facilitates in
arriving at a solution to the problem between the party to the dispute.

3. Reliable information is an indispensable tool for adjudicator. Judicial proceedings make

halting progress because of reluctance of parties to part with inconvenient information.
Alternative dispute resolution moves this drawback in the judicial system. The truth
could be difficulty found out by making a person stand in the - 50 - witness-box and he
pilloried in the public gaze. Information can be gathered more efficiently by an

28
 informal exchange across the table. Therefore, alternative dispute resolution is a step
31
towards success where judicial system has failed in eliciting facts efficiently.

4. In Mediation or Conciliation, parties are themselves prodded to take a decision, since

they are themselves decision-makers and they are aware of the truth of their position,
the obstacle does not exist.

5. The alternative dispute resolution mechanisms by the very methodology used in it can
preserve and enhance personal and business relationships that might otherwise be
damaged by the adversarial process. The method has strength because it yields
enforceable decisions, and is backed by a judicial framework, which, in the last resort,
can call upon the coercive powers of the State. It is also flexible because it allows the
contestants to choose procedures, which fit the nature of the dispute and the business
context in which it occurs. The process of alternative dispute resolution mechanisms is
facilitative, advisory and determinative in nature.

6. The formality involved in the alternative dispute resolution is lesser than traditional
judicial process and costs incurred are very low in alternative dispute resolution.

7. While the cost procedure results in win-lose situation for the disputants.

8. Distinct advantages of alternative dispute redressal methods over traditional Court

proceedings are its procedural flexibility. It can be conducted at any time, and in any
manner to which the parties agree. It may be as casual as a discussion around a
conference table or as structured as a private Court trial. Also unlike the Courts, the
parties have the freedom to choose the applicable law, a neutral party to act as

31
Tania Sourdin , Alternative Dispute Resolution. p 4.

29
 Arbitrator or as the Conciliator in their dispute, on such days and places convenient to
them and fix the fees payable to the neutral party. Alternative dispute resolution
methods being a private process between the disputed parties and the arbitrator,
mediator or the conciliator it offers confidentiality, which is generally not available in
Court proceedings. While a Court procedure results in a win-lose situation for the
disputants, in the alternative dispute resolution methods such as Mediation or
Conciliation, it is a win-win situation for the disputants because the solution to the
dispute emerges with the consent of the parties.

9. Alternative dispute resolution systems will help ‘de-congest’ courts.

10. If the alternative dispute resolution systems in operation : (i) the parties/ disputants will,
more likely than not, realize that there exists no real dispute between them; and (ii)
making an attempts operates as a pre-litigation that may ensure.
11. Finality of the result, cost involved is less, the time required to be spent is less,
efficiency of the mechanism, possibility of avoiding disruption.

12. The Alternative dispute resolution process enables each party to more correctly
understand his case, claim and defense in the backdrop of the admitted facts. Further, it
enables each to access its 'strength’ – from a combination of three factors; (i) tenability
in law/ or prospects of success; (2) morality and fairness; and (3) the need to overcome
technical issues without stifling fairness. With a clear understanding of these three
factors and a balance between them, each party arrives at his notional ‘figure’ for
settlement.

Some of the disadvantages that are found on the methods of alternative methods of dispute
resolution are that, the arbitrators is not subject to overturn on appeal may be more likely to rule

30
according to their personal ideals. Large corporations may exert inappropriate influence in
consumer disputes, pressuring arbitrators to decide in their favor or lose future business. The
burden of paying remuneration for the arbitrators is upon the parties to the dispute, which may
sometime be felt as a burden by the disputants.

The parties can cure these difficulties by prudently entering into the contract and deciding the
terms of referring the dispute, before choosing the alternative dispute redressal forum. The
advantages of alternative dispute resolution methods are so prominent that there is global need and
trend to adopt alternative dispute resolution methods to resolve the - 53 - dispute as it is quick as
well as cheaper than that of adjudication through Courts of Law. As argued by the father of our
32
Nation Mahatma Gandhi, the role of law, is to unite the parties and not to riven them. As
compared to Court procedures, considerable time and money can be saved in solving the disputes
33
through alternative dispute resolution procedures , which can help in reducing the workload of
regular Courts and in long run can pave way in solving the problem of judicial arrears before the
34
Courts of law.

32
Mahatma Gandhi, The story of my experiments with truth 258 (1962).
33
Hiram Chodosh, Global Justice Reform: A Comparative Methodology (2005).
34
A study on the role of alternative dispute resolution methods in reducing the crisis of judicial delays and arrears
with special reference to Pondicherry, by D. Umamaheswari.

31
 CHAPTER 5
ALTERNATE DISPUTE RESOLUTION MECHANISM
The Concept & its efficacy:
“It is the spirit and not the form of law that keeps the justice alive.” LJ Earl Warren
The concept of Conflict Management through Alternative Dispute Resolution (ADR) has
introduced a new mechanism of dispute resolution that is non adversarial. A dispute is basically
‘lis inter partes’ and the justice dispensation system in India has found an alternative to Adversarial
litigation in the form of ADR Mechanism.
New methods of dispute resolution such as ADR facilitate parties to deal with the underlying
issues in dispute in a more cost-effective manner and with increased efficacy. In addition, these
processes have the advantage of providing parties with the opportunity to reduce hostility, regain a
sense of control, gain acceptance of the outcome, resolve conflict in a peaceful manner, and
achieve a greater sense of justice in each individual case. The resolution of disputes takes place
usually in private and is more viable, economic, and efficient. ADR is generally classified into at
least four types: negotiation, mediation, collaborative law, and arbitration. (Sometimes a fifth type,
conciliation, is included as well, but for present purposes it can be regarded as a form of mediation
5.1 Need of ADR in INDIA
The system of dispensing justice in India has come under great stress for several reasons
mainly because of the huge pendency of cases in courts. In India, the number of cases filed in the

32
courts has shown a tremendous increase in recent years resulting in pendency and delays
underlining the need for alternative dispute resolution methods. It is in this context that a
Resolution was adopted by the Chief Ministers and the Chief Justices of States in a conference
held in New Delhi on 4th December 1993 under the chairmanship of the then Prime Minister and
presided over by the Chief Justice of India.
It said:​ "The Chief Ministers and Chief Justices were of the opinion that Courts were not in a
position to bear the entire burden of justice system and that a number of disputes lent themselves to
resolution by alternative modes such as arbitration, mediation and negotiation. They emphasized
the desirability of disputants taking advantage of alternative dispute resolution which provided
procedural flexibility, saved valuable time and money and avoided the stress of a conventional
trial".
In a developing country like India with major economic reforms under way within the
framework of the rule of law, strategies for swifter resolution of disputes for lessening the burden
on [1]the courts and to provide means for expeditious resolution of disputes, there is no better
option but to strive to develop alternative modes of dispute resolution (ADR) by establishing
facilities for providing settlement of disputes through arbitration, conciliation, mediation and
negotiation.

5.2 Impact/Resulting Acts of ADR

The technique of ADR is an effort to design a workable and fair alternative to our traditional
judicial system. It is a fast track system of dispensing justice. There are various ADR techniques
viz. arbitration, mediation, conciliation, mediation-arbitration, mini-trial, private judging, final
offer arbitration, court-annexed ADR and summary jury trial.
These techniques have been developed on scientific lines in USA, UK, France, Canada, China,
Japan, South Africa, Australia and Singapore. ADR has emerged as a significant movement in
these countries and has not only helped reduce cost and time taken for resolution of disputes, but
also in providing a congenial atmosphere and a less formal and less complicated forum for various
types of disputes.

33
 The Arbitration Act, 1940 was not meeting the requirements of either the international or
domestic standards of resolving disputes. Enormous delays and court intervention frustrated the
very purpose of arbitration as a means for expeditious resolution of disputes. The Supreme Court
in several cases repeatedly pointed out the need to change the law. The Public Accounts
Committee too deprecated the Arbitration Act of 1940. In the conferences of Chief Justices, Chief
Ministers and Law Ministers of all the States, it was decided that since the entire burden of justice
system cannot be borne by the courts alone, an Alternative Dispute Resolution system should be
adopted. Trade and industry also demanded drastic changes in the 1940 Act. The Government of
India thought it necessary to provide a new forum and procedure for resolving international and
domestic disputes quickly.
Thus "The Arbitration and Conciliation Act, 1996"came into being. The law relating to
Arbitration and Conciliation is almost the same as in the advanced countries. Conciliation has been
given statutory recognition as a means for settlement of the disputes in terms of this Act. In
addition to this, the new Act also guarantees independence and impartiality of the arbitrators
irrespective of their nationality. The new Act of 1996 brought in several changes to expedite the
process of arbitration. This legislation has developed confidence among foreign parties interested
to invest in India or to go for joint ventures, foreign investment, transfer of technology and foreign
collaborations.
The advantage of ADR is that it is more flexible and avoids seeking recourse to the courts. In
conciliation/mediation, parties are free to withdraw at any stage of time. It has been seen that
resolution of disputes is quicker and cheaper through ADR. The parties involved in ADR do not
develop strained relations; rather they maintain the continued relationship between themselves.
5.3 Arbitration and Conciliation Act. 1996
Part I of this act formalizes the process of Arbitration and Part III formalizes the process of
Conciliation. (Part II is about Enforcement of Foreign Awards under New York and Geneva
Conventions.)
5.3.1 Arbitration
The process of arbitration can start only if there exists a valid Arbitration Agreement between
the parties prior to the emergence of the dispute. As per Section 7, such an agreement must be in

34
writing. The contract, regarding which the dispute exists, must either contain an arbitration clause
or must refer to a separate document signed by the parties containing the arbitration agreement.
The existence of an arbitration agreement can also be inferred by written correspondence such as
letters, telex, or telegrams which provide a record of the agreement. An exchange of statement of
claim and defence in which existence of an arbitration agreement is alleged by one party and not
denied by other is also considered as valid written arbitration agreement

Any party to the dispute can start the process of appointing arbitrator and if the other party
does not cooperate, the party can approach the office of Chief Justice for appointment of an
arbitrator. There are only two grounds upon which a party can challenge the appointment of an
arbitrator – reasonable doubt in the impartiality of the arbitrator and the lack of proper
qualification of the arbitrator as required by the arbitration agreement. A sole arbitrator or panels
of arbitrators so appointed constitute the Arbitration Tribunal.

Except for some interim measures, there is very little scope for judicial intervention in the
arbitration process. The arbitration tribunal has jurisdiction over its own jurisdiction. Thus, if a
party wants to challenge the jurisdiction of the arbitration tribunal, it can do so only before the
tribunal itself. If the tribunal rejects the request, there is little the party can do accept to approach a
court after the tribunal makes an award. Section 34 provides certain grounds upon which a party
can appeal to the principal civil court of original jurisdiction for setting aside the award.

Once the period for filing an appeal for setting aside an award is over, or if such an appeal is
rejected, the award is binding on the parties and is considered as a decree of the court

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 in which the dispute is submitted to an arbitral tribunal which
35
makes a decision (an “award”) on the dispute that is binding on the parties. It is a private,

35
P.C. Rao & William Sheffield, Universal Law Publishing Co. Pvt. Ltd., Alternative Dispute Resolution: What is it
and how it works, at 26(1997 ed., 2006).

35
generally informal and non-judicial trial procedure for adjudicating disputes. There are four
requirements of the concept of arbitration: an arbitration agreement; a dispute; a reference to a
third party for its determination; and an award by the third party.

The essence lies in the point that it is a forum chosen by the parties with an intention that it
must act judicially after taking into account relevant evidence before it and the submission of the
36
parties. Hence it follows that if the forum chosen is not required to act judicially, the process it is
not arbitration

5.3.2 Conciliation
Conciliation is a less formal form of arbitration. This process does not require an 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 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 settlement and send it to the parties for their acceptance. If both the parties sign the settlement
document, it shall be final and binding on both.
Note that in USA, this process is similar to Mediation. However, in India, Mediation is
different from Conciliation and is a completely informal type of ADR mechanism.

Conciliation is “a process in which a neutral person meets with the parties to a dispute which
might be resolved; a relatively unstructured method of dispute resolution in which a third party
37
facilitates communication between parties in an attempt to help them settle their differences”.

36
Pride of Asia Films v Essel Vision (2004) 3 Arb. LR 169, 180 (Bom).
37
Garner, Black’s Law Dictionary (9​th​ ed.,2009)

36
 This consists in an attempt 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
generally based on showing each side the contrary aspects of the dispute, in order to bring each
side together and to reach a solution.

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

There is a subtle difference between mediation and conciliation. While in meditation, the third
party, neutral intermediary, termed as mediator plays more active role by giving independent
compromise formulas after hearing both the parties; in conciliation, the third neutral intermediary’s
role, is to bring the parties together in a frame of mind to forget their animosities and be prepared
for an acceptable compromise on terms midway between the stands taken before the
commencement of conciliation proceedings.
5.3.3 Mediation
Mediation, a form of alternative dispute resolution (ADR) or "appropriate dispute resolution",
aims to assist two (or more) disputants in reaching an agreement. The parties themselves determine
the conditions of any settlements reached— rather than accepting something imposed by a third
party. The disputes may involve (as parties) states, organizations, communities, individuals or
other representatives with a vested interest in the outcome.
Mediators use appropriate techniques and/or skills to open and/or improve dialogue between
disputants, aiming to help the parties reach an agreement (with concrete effects) on the disputed
matter. Normally, all parties must view the mediator as impartial.
Disputants may use mediation in a variety of disputes, such as commercial, legal, diplomatic,
workplace, community and family matters.

37
 A third-party representative may contract and mediate between (say) unions and corporations.
When a workers’ union goes on strike, a dispute takes place, and the corporation hires a third party
to intervene in attempt to settle a contract or agreement between the union and the corporation.
Mediation is a process in which the mediator, an external person, neutral to the dispute, works
38
with the parties to find a solution which is acceptable to all of them. The basic motive of
mediation is to provide the parties with an opportunity to negotiate, converse and explore options
aided by a neutral third party, to exhaustively determine if a settlement is possible.

Mediation is negotiation carried out with the assistance of a third party. The mediator, in
contrast to the arbitrator or judge, has no power to impose an outcome on disputing parties.
Despite the lack of ‘teeth’ in the mediation process, the involvement of a mediator alters the
39
dynamics of negotiations. The concept of mediation is not foreign to Indian legal system, as there
existed, different aspects of mediation. The Village Panchayats and the Nyaya Panchayats are good
examples for this. A brief perusal of the laws pertaining to mediation highlights that it has been
largely confined to commercial transactions. The Arbitration and Conciliation Act, 1996 is framed
in such a manner that it is concerned mainly with commercial transactions that involves the
common man rather than the common man’s interest.

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

5.3.4 Negotiation
Negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses
of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various
interests. It is the primary method of alternative dispute resolution.

38
Sriram Panchu, LexisNexis, Mediation: Practice and Law, at 9, (2011).
39
Goldberg, et al Aspen Publishers, Dispute Resolution: Negotiation, Mediation, and Other Processes, at 107
(5​th​ ed., 2007).

38
 Negotiation occurs in business, non-profit organizations, government branches, legal
proceedings, among nations and in personal situations such as marriage, divorce, parenting, and
everyday life. The study of the subject is called negotiation theory. Those who work in negotiation
professionally are called negotiators. Professional negotiators are often specialized, such as union
negotiators, leverage buyout negotiators, peace negotiators, hostage negotiators, or may work
under other titles, such as diplomats, legislators or brokers

Negotiation-communication for the purpose of persuasion-is the pre-eminent mode of dispute

resolution. Compared to processes using mutual third parties, it has the advantage of allowing the
parties themselves to control 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;
6. There is a possibility of achieving wide ranging solutions, and of maximizing joint gains.

In India, Negotiation doesn’t have any statutory recognition. Negotiation is self counseling
between the parties to resolve their dispute. Negotiation is a process that has no fixed rules but
follows a predictable pattern.

5.3.5 Lok Adalat

39
 “While Arbitration and Conciliation Act, 1996 is a fairly standard western approach towards
ADR, the Lok Adalat system constituted under National Legal Services Authority Act, 1987 is a
uniquely Indian approach”.
It roughly means "People's court". India has had a long history of resolving disputes through
the mediation of village elders. The system of Lok Adalats is an improvement on that and is based
on Gandhian principles. This is a non-adversarial system, where by mock courts (called Lok
Adalats) are held by the State Authority, District Auth[2]ority, Supreme Court Legal Services
Committee, High Court Legal Services Committee, or Taluk Legal Services Committee,
periodically for exercising such jurisdiction as they thinks fit. These are usually presided by retired
judge, social activists, or members of legal profession. It does not have jurisdiction on matters
related to non-compoundable offences
There is no court fee and no rigid procedural requirement (i.e. no need to follow process given
by Civil Procedure Code or 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 the 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 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.
Lok Adalat (people’s courts), established by the government, settles dispute through
conciliation and compromise. The First Lok Adalat was held in Chennai in 1986. Lok Adalat
accepts the cases which could be settled by conciliation and compromise and pending in the
regular courts within their jurisdiction.
The Lok Adalat is presided over by a sitting or retired judicial officer as the chairman, with
two other members, usually a lawyer and a social worker. There is no court fee. If the case is

40
already filed in the regular court, the fee paid will be refunded if the dispute is settled at the Lok
Adalat. The procedural laws and the Evidence Act are not strictly followed while assessing the
merits of the claim by the Lok Adalat.
Main condition of the Lok Adalat is that both parties in dispute should agree for settlement.
The decision of the Lok Adalat is binding on the parties to the dispute and its order is capable of
execution through legal process. No appeal lies against the order of the Lok Adalat.
Lok Adalat is very effective in settlement of money claims. Disputes like partition suits,
damages and matrimonial cases can also be easily settled before Lok Adalat as the scope for
compromise through an approach of give and take is high in these cases.
Lok Adalat is a boon to the litigant public, where they can get their disputes settled fast and
free of cost.

Lok Adalat was a historic necessity in a country like India where illiteracy dominated other
aspects of governance. It was introduced in 1982 and the first Lok Adalat was initiated in Gujarat.
The evolution of this movement was a part of the strategy to relieve heavy burden on courts with
pending cases. It was the conglomeration of concepts of social justice, speedy justice, conciliated
result and negotiating efforts. They cater the need of weaker sections of society. It is a suitable
alternative mechanism to resolve disputes in place of litigation. Lok Adalats have assumed
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 help of District Legal
Aid and Advice Committees.

41
 CHAPTER 6
ALTERNATIVE DISPUTE RESOLUTION IN INDIA

6.1 INTRODUCTION

“I realized that the true fiction of a lawyer was to unite parties… A large part of my time
during the 20 years of my practice as a lawyer was occupied in bringing out private compromise
of hundreds of cases. I lost nothing thereby- not even money, certainly not my soul.”
– Mahatma Gandhi

ADR is not immune from criticism. Some have seen in it a waste of time; others recognize the
40
risk that it be only initiated to check what is the minimum offer that the other party would accept.
The delay in disposal of cases in Law Courts, for whatever reason it may be, has really defeated
the purpose for which the people approach the Courts for their redressal. In many parts of India,
rapid development has meant increased caseloads for already overburdened courts, further leading
to notoriously slow adjudication. As a result, alternative dispute resolution mechanisms have
become more crucial for businesses operating in India as well as those doing businesses with
41
Indian firms. So Alternate Dispute Resolution (herein after as ADR) is necessary as a substitute
to existing methods of dispute resolution such as litigation, conflict, violence and physical fights or

40
Mauro Rubino-Sammartano, Wolters Kluwer (India) Pvt. Ltd., New Delhi, International Arbitration Law and
Practice, at 13, (2​nd​ Ed., 2007).
41
Krishna Sarma, Momota Oinam & Angshuman Kaushik, “​Development and Practice of Arbitration in India –Has
it Evolved as an Effective Legal Institution

42
rough handling of situations. It is a movement with a drive from evolving positive approach and
42
attitude towards resolving a dispute.

In the subsequent parts of the paper we will discuss the evolution of ADR and its present
scenario in the Indian context.

6.2 LEGISLATIONS OF ADR IN INDIA

6.2.1 Code of Civil Procedure

The Code of Civil Procedure, 1859 in its sections 312 to 325 dealt with arbitration in suits
while sections 326 and 327 provided for arbitration without court intervention. The Code of Civil
Procedure (Act 5 of 1908) repealed the Act of 1882. The Code of Civil Procedure, 1908 has laid
43
down that cases must be encouraged to go in for ADR under section 89(1). Under the First
Schedule, Order XXXII A, Rule 3 a duty is cast upon the courts that it shall make an endeavor to
assist the parties in the first instance, in arriving at a settlement in respect of the subject matter of
44
the suit. The second schedule related to arbitration in suits while briefly providing arbitration
without intervention of a court. Order I, Rule 1 of the schedule says that where in any suit, all the
parties agree that any matter in difference between them shall be referred to arbitration, they may,
at any time before judgment is pronounced; apply to the court for an order of reference. This
schedule, in a way supplemented the provisions of the Arbitration Act of 1899.

6.3.2 Indian Arbitration Act, 1899:

This Act was substantially based on the British Arbitration Act of 1889. It expanded the area of
arbitration by defining the expression ‘submission’ to mean “a written agreement to submit present
and future differences to arbitration whether an arbitrator is named therein or not”.

42
Madhubhushi Sridhar, LexisNexis Butterworths, Alternative Dispute Resolution: Negotiation and Mediation, at
st​
1, (1​ Ed. 2006).
43
Civil Procedure Code, 1908 as amended and implemented in 2002.
44
Civil Procedure Code 1908, Order XXXII A Rule 3

43
 6.2.3 Arbitration (Protocol and Convention) Act 1937:

The Geneva Protocol on Arbitration Clauses 1923 and the Geneva Convention on the
Execution of Foreign Arbitral Awards 1927 were implemented in India by the Arbitration
(Protocol and Convention) Act, 1937. This Act was enacted with the object of giving effect to the
Protocol and enabling the Convention to become operative in India.

6.2.4 The Arbitration Act of 1940:

The Arbitration Act, 1940, dealt with only domestic arbitration. Under the 1940 Act,
intervention of the court was required in all the three stages of arbitration in the tribunal, i.e. prior
to the reference of the dispute, in the duration of the proceedings, and after the award was passed.

This Act made provision for- a) arbitration without court intervention; b) arbitration in suits i.e.
arbitration with court intervention in pending suits and c) arbitration with court intervention, in
cases where no suit was pending before the court.

Before an arbitral tribunal took cognizance of a dispute, court intervention was required to set
the arbitration proceedings in motion. The existence of an agreement and of a dispute was required
to be proved. During the course of the proceedings, the intervention of the court was necessary for
the extension of time for making an award. Finally, before the award could be enforced, it was
required to be made the rule of the court. This Act did not fulfill the essential functions of ADR.
45
The extent of Judicial Interference under the Act defeated its very purpose. It did not provide a
speedy, effective and transparent mechanism to address disputes arising out of foreign trade and
46
investment transactions.

6.2.5 Arbitration and Conciliation Act, 1996:

45
Hon’ble Thiru Justice S.B.Sinha, Judge Supreme Court of India, ‘ADR and Access to Justice: Issues and
Perspectives’.
46
Justice R S Bachawat’s, LexisNexis, “Law of Arbitration and Conciliation”, preface commentary, (3​rd​ed., 1999).

44
 The government enacted the Arbitration and Conciliation Act, 1996 in an effort to modernize
the 1940 Act. In 1978, the UNCITRAL Secretariat, the Asian African Legal Consultative
Committee (AALCC), the International Council for Commercial Arbitration (ICCA) and the
International Chamber of Commerce (ICC) met for a consultative meeting, where the participants
were of the unanimous view that it would be in the interest of International Commercial
Arbitration if UNCITRAL would initiate steps leading to the establishment of uniform standards of
arbitral procedure. The preparation of a Model Law on arbitration was considered the most
appropriate way to achieve the desired uniformity. The full text of this Model Law was adopted on
21​st​ June 1985 by UNCITRAL. This is a remarkable legacy given by the United Nations to
International Commercial Arbitration, which has influenced Indian Law. In India, the Model Law
has been adopted almost in its entirety in the 1996 Act. This Act repealed all the three previous
statutes. Its primary purpose was to encourage arbitration as a cost-effective and quick mechanism
for the settlement of commercial disputes. It covers both domestic arbitration and international
commercial arbitration. It marked an epoch in the struggle to find an alternative to the traditional
adversarial system of litigation in India.

The changes brought about by the 1996 Act were so drastic that the entire case law built up
over the previous fifty-six years on arbitration was rendered superfluous. Unfortunately, there was
no widespread debate and understanding of the changes before such an important legislative
change was enacted. The Government of India enacted the 1996 Act by an ordinance, and then
extended its life by another ordinance, before Parliament eventually passed it without reference to
Parliamentary Committee.

Arbitration, as practiced in India, instead of shortening the lifespan of the dispute resolution,
became one more “inning” in the game. Not only that, the arbitrator and the parties’ lawyers
treated arbitration as “extra time” or overtime work to be done after attending to court matters. The
result was that the normal session of an arbitration hearing was always for a short duration.
Absence of a full-fledged Arbitration Bar effectively prevented arbitrations being heard

45
continuously on day-to-day basis over the normal working hours, viz. 4-5 hours every day. This
resulted in elongation of the period for disposal.

Veerappa Moily also said in the ADR congress held in the year 2010 that the 1996 Act,
although modeled along international standards, has so far proved to be insufficient in meeting the
needs of the business community, for the speedy and impartial resolution of disputes in India.

CHAPTER 7
SUGGESTIONS FOR IMPROVING MECHANISM

The evolution of ADR mechanisms was not of that much success. Thereby, the trend is the
imposition of responsibility and duty on Court.

i) Courts are authorized to give directives for the adoption of ADR mechanisms
by the parties and for that purpose Court has to play important role by way of
giving guidance. Power is also conferred upon the courts so that it can intervene
in different stages of proceedings. But these goals cannot be achieved unless
requisite infrastructure is provided and institutional frame work is put to place.
ii) The institutional framework must be brought about at three stages, which are:

1. Awareness: It can be brought about by holding seminars, workshops, etc. ADR literacy
program has to be done for mass awareness and awareness camp should be to change the
mindset of all concerned disputants, the lawyers and judges.
2. Acceptance: In this regard training of the ADR practitioners should be made by some
University together with other institutions. Extensive training would also be necessary to be
imparted to those who intend to act as a facilitator, mediators, and conciliators. Imparting

46
 of training should be made a part of continuing education on different facets of ADR so far
as judicial officers and judges are concerned.
3. Implementation: For this purpose, judicial officers must be trained to identify cases which
would be suitable for taking recourse to a particular form of ADR.

iii)ADR Mechanisms to be made more viable: The inflow of cases cannot be stopped because
the doors of justice cannot be closed. But there is a dire need to increase the outflow either by
strengthening the capacity of the existing system or by way of finding some additional outlets.

iv)Setting up of Mediation Centres in all districts of each state with a view to mediate all
disputes will bring about a profound change in the Indian Legal system. These Mediation centres
would function with an efficient team of mediators who are selected from the local community
itself.

v) Not many Indians can afford litigation. This kind of state of affairs makes common people,
especially rural people, cynical about judicial process. We must take the ADR mechanism beyond
the cities. Gram Nyayalayas should process 60 to 70 percent of rural litigation leaving the regular
courts to devote their time to complex civil and criminal matters.

vi) More and more ADR centres should be created for settling disputes out-of-court. ADR
methods will achieve the objective of rendering social justice to the people, which is the goal of a
47
successful judicial system.

vii) The major lacuna in ADR is that it is not binding. One could still appeal against the award
or delay the implementation of the award. “Justice delayed is justice denied.” The very essence
of ADR is lost if it is not implemented in the true spirit. The award should be made binding on

47
Government of India, Law Commission of India, 222​nd​ report, ’Need for Justice-dispensation through ADR etc.’

47
the parties and no appeal to the court should be allowed unless it is arrived at fraudulently or if
48
it against public policy.

With the advent of the alternate dispute resolution, there is new avenue for the people to settle
their disputes. The settlement of disputes in Lok Adalat quickly has acquired good popularity
among the public and this has really given rise to a new force to ADR and this will no doubt
reduce the pendency in law Courts. There is an urgent need for justice dispensation through ADR
mechanisms. The ADR movement needs to be carried forward with greater speed. This will
considerably reduce the load on the courts apart from providing instant justice at the door-step,
without substantial cost being involved. If they are successfully given effect then it will really
achieve the goal of rendering social justice to the parties to the dispute.

National arbitration laws

The Arbitration and Conciliation Act 1996 is the key law governing arbitration in India. The
act has four parts:
● Part I sets out general provisions on domestic arbitration;
● Part II addresses the enforcement of foreign awards (Chapter 1 deals with New York
Convention awards and Chapter II with awards under the 1927 Geneva Convention);
● Part III deals with conciliation; and
● Part IV sets out certain supplementary provisions.
Parts I and II are the most significant and are based on the UNCITRAL Model Law and the
New York Convention respectively.
The act also contains seven schedules which are as follows:

48
Nishita Medha​, Alternative Dispute Resolution in India-A study on concepts, techniques, provisions, problems in
Implementation and solutions.

48
 ● the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral
Awards (Section 44);
● the 1923 Geneva Protocol on Arbitration Clauses (Section);
● the 1927 Geneva Convention on the Execution of Foreign Arbitral Awards (Section 53);
● the Model Fee Schedule for Calculating Arbitrators’ Fees (Section 11(14));
● the Arbitrator Guidelines on Impartiality and Independence (Section 12(1)(b));
● the Model Form for Arbitrators’ Disclosure of Independence and Impartiality (Section
12(1)(b)); and
● the grounds for ineligibility in case of an arbitrator’s relationship with the parties or
counsel (Section 12(5)).

CHAPTER 8
ARBITRAL PROCEEDINGS

Under the Arbitration and Conciliation Act, a party can commence arbitration by issuing a
notice in writing to the other party of its intention to refer the dispute to arbitration. Unless
otherwise agreed by the parties, arbitration proceedings are deemed to have commenced on the
date on which the respondent receives such notice from the claimant.

Limitation periods

The Limitation Act 1963 applies to all proceedings under the Arbitration and Conciliation Act,
just as it applies to proceedings in the Indian courts, except to the extent expressly excluded by the
Arbitration and Conciliation Act. Any arbitration proceedings commenced after the limitation
period (three years from the date on which the cause of action arose) will be time barred.

Procedural rules

49
 The parties can agree on the procedure for conducting the arbitration proceedings. If no such
procedure is agreed by the parties, the tribunal is authorised to conduct the proceedings in such
manner as it considers appropriate. The tribunal is expressly exempt from applying the provisions
of the Civil Procedure Code 1908 and the Evidence Act 1872. If, under the arbitration agreement,
the arbitration is to be administered by an arbitration institution, the rules of that institution
become a part of the arbitration clause by implication.

The Arbitration and Conciliation (Amendment) Act inserted amendments into the Arbitration
Act that require the tribunal to, as far as possible, hold oral hearings for the presentation of
evidence or for oral argument on a day-to-day basis, and not grant adjournments unless sufficient
cause is provided. The tribunal may impose exemplary costs on the party seeking frivolous
adjournments.

Dissenting arbitrators

Dissenting opinions are permitted under the Arbitration and Conciliation Act. The dissenting
arbitrators have the option to prepare a separate award or to give their opinion in the same
document which contains the award of the majority members of the tribunal. However, this
dissenting opinion or award does not form part of the majority decision and is not enforceable.

Judicial assistance

Local courts can intervene in domestic arbitration proceedings. This includes the power to
issue interim orders, order evidence to be produced directly to the tribunal and appoint arbitrators.

Courts can assist in selecting arbitrators if the parties are unable to agree on the appointment of
a sole arbitrator or if the two party-appointed arbitrators fail to appoint a chairperson.

50
 If a respondent fails to participate in arbitration without sufficient cause, the tribunal may
proceed ex parte or adjourn the proceedings. If the respondent fails to communicate its statement
of defence, the tribunal may treat the respondent’s right as being forfeited or continue the
proceedings without considering such failure to be an admission of the claimant’s allegations.

While arbitrators cannot compel third parties to appear before them, the tribunal or a party,
with the tribunal’s approval, may apply to the court for assistance in taking evidence. The court
may make an order requiring third parties to provide evidence directly to the tribunal. If a person
fails to attend in accordance with such order of the court, it is subject to the same penalties and
punishments as it may have incurred during court proceedings.

Third parties

The Arbitration and Conciliation Act grants no powers to a tribunal to enjoin a third party to
pending arbitration proceedings. Non-signatories to the arbitration agreement can be bound by the
arbitration agreement under the ‘groups of companies’ doctrine where a clear intent to bind such
non-signatories can be established.

Default language and seat

The parties can agree on the language(s) and location to be used in the arbitration proceedings.
In the absence of such agreement, the tribunal has the discretion to determine the language(s) and
location.

Gathering evidence

51
 The parties are free to agree on the rules of gathering and submitting evidence. If the parties do
not agree on these matters, the tribunal has the discretion to determine how evidence may be
gathered and submitted to it. The courts can assist the tribunal in taking evidence if such assistance
is sought either by the tribunal or by one of the parties with prior approval of the tribunal. The
tribunal is required to observe the fundamental principles of natural justice when considering
evidence.

The tribunal may take both documentary and oral evidence on record

Confidentiality

The Arbitration and Conciliation Act does not include specific provisions on the confidentiality
of arbitration proceedings. As a result, there is no express obligation to treat an arbitration
agreement, any proceedings arising therefrom or the award as confidential. Parties can address the
issue of confidentiality in the arbitration agreement or by separate agreement. The act expressly
provides only for confidentiality of all matters relating to conciliation proceedings, including the
settlement agreement.

Section 75 of the act provides for confidentiality in conciliation proceedings. The Supreme
Court has found that the duty of confidentiality is implied in mediation proceedings.
Ethical codes

The Arbitration and Conciliation Act provides that arbitrators should be independent and
impartial, treat each party equally and give each party an equal opportunity to present their case.

The Arbitration and Conciliation (Amendment) Act inserted three schedules dealing with
arbitrator independence and impartiality. A prospective arbitrator must now disclose in writing (in
the form set out in the Sixth Schedule):

52
 ● the existence of any relationships which would be likely to give rise to justifiable doubts
about his or her independence or impartiality; and
● any circumstances that would affect the arbitrator’s ability to devote sufficient time to the
arbitration and complete the arbitration within 12 months.

In line with the IBA Guidelines on Conflicts of Interest in International Arbitration, the Fifth
Schedule lists the various grounds which will help to determine whether a circumstance gives rise
to justifiable doubts as to the independence or impartiality of an arbitrator.

Also following the IBA Guidelines, the Seventh Schedule lists a number of situations which
would render the prospective arbitrator ineligible for appointment, except where the parties have
agreed to waive the applicability of this provision.

Costs

Estimation & allocation

Subject to any agreement between the parties, the costs of arbitration are fixed by the tribunal.
In doing so, the tribunal is to identify:
● whether costs are payable by one party to another;
● the amount of costs; and
● when such costs are to be paid

The Arbitration and Conciliation Act defines ‘costs’ as:

● reasonable sums relating to the fees and expenses of the arbitrators, courts and witnesses;
● legal fees and expenses;
● fees of the arbitration institution; and

53
 ● any other expense incurred in connection with the arbitration proceedings.

The Arbitration and Conciliation (Amendment) Act introduced a new regime for costs, with a
general rule that the unsuccessful party will be ordered to pay costs to the successful party.
However, the tribunal may depart from this rule and apportion costs differently in view of the
conduct of the parties.

Security for costs

The Arbitration and Conciliation Act empowers both a court and a tribunal to order security for
costs as an interim measure.

The award

Requirements

The award must be in writing and be signed by all members of the tribunal or signed by the
majority with reasons for any omitted signatures. The Arbitration and Conciliation Act requires the
award to set out the reasons on which it is based, unless the parties have agreed that no reasons are
to be given. The award should state the date and place of the arbitration, and a signed copy must be
delivered to each party.

Timeframe for delivery

In accordance with the Arbitration and Conciliation (Amendment) Act, the tribunal must
render awards within 12 months of the date that it enters the reference. This period can be

54
extended by up to six months if all of the parties agree. If the award is not made within 12 months
or within the mutually extended period, the tribunal’s mandate would be terminated, unless the
period has been extended by the court.

Remedies

The Arbitration and Conciliation Act imposes no specific limitations on the remedies available
through arbitration. The limitations are thus the same as those applicable in any Indian court
proceedings. The tribunal can order specific performance and award damages, injunctions,
declarations, costs and interest. Under Indian law, exemplary or punitive damages for breach of
contract are not available.

Indian courts can issue interim measures pending constitution of the tribunal. Thereafter, this
power continues through the proceedings until the declaration of the award, only if the courts find
that interim measures ordered by the tribunal would not be effective.

Both courts and tribunals can issue interim measures, but courts have wider powers to grant
interim protections.

Available interim measures include:

● injunctions;
● appointment of a receiver;
● orders for preservation, custody, sale and protection of goods;
● securing the amount in dispute in the arbitration; and
● any other interim measure that may be just and convenient.

The Arbitration and Conciliation (Amendment) Act has clarified that Indian courts will have
the ability to grant interim measures of protection in relation to arbitrations seated outside India.

55
 Interest

Subject to any agreement between the parties, the tribunal has discretion on matters relating to
the award of interest. It may award interest at such rate as it deems reasonable on the whole or part
of the amount, for the whole or part of the period between the date on which the cause of action
arose and the date of the award.

The Arbitration and Conciliation (Amendment) Act provides that an award will carry interest
at the rate of 2% higher than the existing rate of interest prevalent on the date of award, unless the
award otherwise directs.

Finality

Under the Arbitration and Conciliation Act, the award is final and binding on the parties
(subject to any right to challenge the award).

The act allows a tribunal to:

● correct any computation, clerical, typographical or similar error;
● provide its interpretation of a specific point or part of an award; and
● make an additional award as to claims omitted from the original award.

The right to challenge an award is a statutory right and thus cannot be waived or taken away by
an agreement between the parties.

Appeal

56
 An application to challenge the award must be filed in court within three months of receipt of
the award. In certain circumstances, the court may consider an application for setting aside within
a further period of 30 days if it is satisfied that there was sufficient cause for such delay. If the
court rejects the application for challenge, the award is enforceable as a decree of the court. The
unsuccessful party has only one right to appeal an order setting aside or refusing to set aside an
award and no second appeal can be made against an appellate order. However, there is a
constitutional right to file an appeal before the Supreme Court of India (a ‘special leave petition’).
The Supreme Court will exercise its discretion sparingly and consider such an appeal only if there
is a gross error of law or an important issue of law is involved.

The parties cannot enter into an agreement to waive their right to challenge an arbitral award.

The Arbitration and Conciliation Act allows for challenges to the award. The grounds for
challenging domestic awards under Indian law are largely based on Article 34 of the UNCITRAL
Model Law. A challenging party can raise the following grounds:
● lack of capacity of the parties to conclude an arbitration agreement;
● lack of a valid arbitration agreement;
● lack of proper notice of appointment of an arbitrator or of the arbitration proceedings, or
inability of a party to present its case;
● lack of impartiality or independence of the arbitrator;
● composition of the tribunal or conduct of the proceedings contrary to the effective
agreement of the parties;
● non-arbitrability of the subject matter of the dispute; or
● conflict with the public policy of India.

The public policy ground has been narrowly defined by the Arbitration and Conciliation
(Amendment) Act, confining its application to cases of fraud or corruption in the making of the
award, where the award is in “contravention with the fundamental policy of Indian law”, or where

57
the award is in “conflict with the most basic notions of morality or justice”. It further clarifies that
the public policy ground shall not entail a review on the merits of the dispute. In domestic
arbitrations, “patent illegality appearing on the face of the award” provides an additional public
policy-based ground for challenge.

Enforcement

The Arbitration and Conciliation Act states that an award may be enforced as if it were an
Indian court decree.

A domestic award does not require separate enforcement application proceedings. On the other
hand, a foreign award (ie, an award in arbitration seated outside India) is enforced through an
enforcement process in any court within the territorial limits where the defendant resides or has its
business or where its assets are located.

India is a party to the New York Convention. The enforceability of an award issued by a
tribunal seated in India in an international jurisdiction will therefore depend on whether that
jurisdiction has signed the New York Convention and its reservations at the time of signature.

The defence of sovereign immunity is not available to state entities at the enforcement stage
where those state entities are engaged in commercial activities.

Section 48 of the Arbitration and Conciliation Act lists the grounds on which the enforcement
of a New York Convention award may be refused and is based on Article V of the New York
Convention.

Awards issued in most of the major arbitration centres of the world are enforceable in India.
Part II of the Arbitration and Conciliation Act, which governs enforcement of foreign awards in
India, applies only to awards issued in jurisdictions notified by the Indian government as

58
jurisdictions in which the New York Convention applies. The government has notified all key
centres of international arbitration, including France, the United Kingdom, China, Singapore,
Sweden, Switzerland and the United States.

A party enforcing an award issued in an arbitration seated outside India under the New York
Convention must apply to court and produce the following documents:
● the original award or an authenticated copy;
● the original arbitration agreement or a duly certified copy;
● such evidence as may be necessary to prove that the award is a foreign award; and
● translations of these documents into English, if necessary.

Indian courts will not enforce a foreign award that has been set aside by the court at the place
of arbitration.
Third-party funding

Rules and restrictions

The Arbitration and Conciliation Act is silent on third-party funding. There are no rules or
restrictions in India dealing with third-party funding of arbitrations.

59
 CONCLUSION

The procedures and techniques discussed above are the most commonly employed methods of
ADR. Negotiation plays an important role in each method, either primarily or secondarily.
However, there are countless other ADR methods, many of which modify or combine the
above methods. For example, it is not uncommon for disputants to begin negotiations with
early neutral evaluation and then move to nonbinding mediation. If mediation fails, the
parties may proceed with binding arbitration. The goal with each type of ADR is for the
parties to find the most effective way of resolving their dispute without resorting to
litigation. The process has been criticized as a waste of time by some legal observers who
believe that the same time could be spent pursuing the claims in civil court, where
negotiation also plays a prominent role and litigants are protected by a panoply of formal
rights, procedures, and rules. But many participants in unsuccessful ADR proceedings
believe it is useful to determine that their disputes are not amenable to a negotiated
settlement before commencing a lawsuit.

Despite its success over the past three decades, ADR is not the appropriate choice for all
disputants or all legal disputes. Many individuals and entities still resist ADR because it

60
 lacks the substantive, procedural, and evidentiary protections available in formal civil
litigation. For example, parties to ADR typically waive their rights to object to evidence
that might be deemed inadmissible under the rules of court. Hearsay evidence is a common
example of evidence that is considered by the parties and intermediaries in ADR forums
but that is generally excluded from civil trials. If a disputant believes that he or she would
be sacrificing too many rights and protections by waiving the formalities of civil litigation,
ADR will not be the appropriate method of dispute resolution.

BIBLIOGRAPHY
PRIMARY SOURCES

1. Arbitration Act, 1940 [Repealed]

2. Arbitration and Conciliation Act, 1996
3. Code of Civil Procedure, 1908
4. Constitution of India, 1950
5. Court Fees Act, 1870
6. Family Courts Act, 1984
7. Federal Arbitration Act, 1925
8. Gram Nyayalayas Act, 2008
9. Hindu Marriage Act, 1955
10. Indian Stamp Act, 1889
11. Industrial Disputes Act, 1947
12. Legal Services Authorities Act, 1987
13. Registration Act, 1908
14. The New York Convention, 1958
15. UNCITRAL Model Law

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SECONDARY SOURCES

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1. Alexander Bevan​, Alternative Dispute Resolution 12 (Sweet and Maxwell, London, 1992)
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& Maxwell 1991)
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30. Moffit ML and Bordone RC (eds), ​The Handbook of Dispute Resolution ​(1​st​ Edition Jossey
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Works (​ Reprint Edition 2009 Universal Law Publishing)
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Making ​(First Published in 2005 Cambridge University Press)
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Resolution Mechanisms​ (Central Law Agency, Allahabad, 1st Edn., 2007).
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 44. Stephen B. Goldberg, Frank EA Sander, Nancy H. Rogers & S.R. Cole, ​Dispute
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III.REPORTS:
1. Department Related Parliamentary Standing Committee (Rajya Sabha), Ninth Report
2. Law Commission of India 124th Report on the High Court Arrears-a Fresh Look (1988)
3. Law Commission of India, 120​th Report on Manpower Planning in the Judiciary: A
Blueprint¸ Ministry of Law, Justice and Company Affairs, Government of India (1987)

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 4. Law Commission of India, 129th Report, Urban Litigation: Mediation as Alternative to
Litigation (1988)
5. Law Commission of India, 14th Report on Reforms of the Judicial Administration (1958).
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(2001)
7. Law Commission of India, 188th Report on Proposals for Constitution of Hi-tech
FastTrack Commercial Divisions in High Courts (2003)
8. Law Commission of India, 213th Report on Fast Track Magisterial Courts for Dishonoured
Cheque Cases (2008)
9. Law Commission of India, 221st Report on Need for Speedy Justice – Some Suggestions
(2009)
10. Law Commission of India, 222nd Report on Need for Justice-dispensation through ADR
etc (2009).
11. Law Commission of India, 238th Report, Amendment of Section 89 of the Code of Civil
Procedure, 1908 and Allied Provisions (December, 2011)
12. Law Commission of India, 27th Report
13. Law Commission of India, 76th Report, the Arbitration Act, 1940 (1978)
14. Law Commission of India, 77th Report, The Arbitration ACT, 1940.
15. Law Reform Commission, Ireland, Report on Alternative Dispute Resolution: Mediation
and Conciliation (LRC 98-2010), (November 2010)
16. On Personnel, Public Grievances, Law and Justice on the Arbitration and
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