Insights

The evolution of humanity has seen the evolution of disputes and dispute resolution as well. Dispute resolution has evolved since time immemorial. Fighting a war was the oldest method of dispute resolution. Over time, it led to disputes being resolved through Panchayat systems. Eventually it paved the way for the more legally structured litigation in Courts of law.

With the unimaginable increase in volume of legal disputes, judiciary is overburdened leading to considerable delay in resolving cases besides mounting costs for litigation. Hence the need for alternative methods of dispute resolution, for not all disputes require resolution in courts of law.

Alternate Dispute Resolution (‘ADR’)

As the name suggests, methods of dispute resolution that involve amicable ways of discussion and or negotiation without having to go through the laborious process time, money and energy consuming process of courts are called alternate dispute resolution methods. Such methods are considered less time consuming and cost effective than approaching courts.

Alternate methods of dispute resolution have been in existence since time immemorial. In the last two decades though, it has gained popularity for its effectiveness. Section 89 of the Civil Procedure Code 1908 recognizes Arbitration, Conciliation, Mediation and Judicial settlement (Lok Adalat) as means of ADR. A look highlights of these ADR methods:

Arbitration

One of the most popular modes of ADR is arbitration. Arbitration is a procedure by which parties to a dispute approach a third neutral party (‘arbitrator’ or group of ‘arbitrators’) who makes a decision that is usually binding on both parties. It is normal practice for one arbitrator to be appointed. Alternatively, each party can appoint one arbitrator. The appointed arbitrators will together appoint a third arbitrator who will serve as the presiding arbitrator.

Key points to keep in mind about arbitration:

• Consensual. Both parties must consent to refer their disputes to arbitration proceedings.
• Flexible. Both parties have the freedom to determine the applicable law, language and place for conduct of proceedings. The arbitrator(s) enjoys freedom to deal with the proceedings as they do not have to adhere to judicial courtroom procedure.   
• Final decision is binding and enforceable by Courts of law.
• Private and confidential Any party who is not party to the dispute cannot attend hearings in arbitration (unlike in Courts of law)
• Cost and time effective. Typically, arbitration proceedings taken between 6 months to a year to complete thereby economising on cost and time.

However, arbitration as a mechanism also suffers some disadvantages –

• If arbitration clause is mandatory in the contract, then there may not be mutual agreement on choice of arbitrator. In such cases, unless expressly stated in the contract, one party may impose on the other to go to arbitration, which is akin to going to Court.
• If the arbitration proceedings are delayed it would automatically escalate cost and time factor.
• Impartiality in dealing by the arbitrator may also come under question. There have been instances of an arbitrator favouring one party over the other either because of a vested interest or a potential interest. In such cases the final decision may be biased.

Typically, commercial contracts and employment agreements or contracts are referred to arbitration, though all civil and commercial cases can be referred to arbitration.

Presently, in India the Arbitration and Conciliation Act 1996 (including amendments) govern the arbitration proceedings in India.  The Act is based on the UNCITRAL – United Nations Commission on International Trade Law – a law that address international commercial dispute resolution. In addition, India has been signatory to the Convention on the recognition and enforcement of foreign arbitral awards executed in New York. Popularly called the ‘New York’ Convention, it is a treaty for enforcing foreign arbitral awards. Simply put, it is a treaty governing arbitration disputes between countries.

India has been proactive in using arbitration as a dispute resolution mechanism. The Covid-19 pandemic and resultant disruptions bolstered this ADR mechanism.

Conciliation

The Arbitration and Conciliation Act 1996 also contains provisions relating to Conciliation (Part III of the Act). The conciliation process commences when one party invites the other party to the Contract / Agreement to come to an understanding on identifying and finding an amicable solution to the dispute. Typically, it is in writing. The conciliation process will commence only when the other party accepts the proposal. An impartial third party (‘Conciliator’) is appointed by the parties in accordance with the provisions of the Act. A single conciliator can be appointed. If two are appointed, then they could elect a third person as presiding conciliator. Even an institution can be appointed as conciliator. The objective of the conciliation – arrive at an amicable, mutually agreeable cost-effective solution to mutual benefit of both parties.

Conciliation as a method of ADR is like arbitration. However, there are certain differences:

• The conciliation facilitates arrival at an amicable solution for dispute resolution. The final decision is only persuasive, discretionary, and non-binding in nature. In an arbitration, the final decision is legally binding on both parties irrespective of whether the decision is favourable to them or not. The outcome of arbitration can also be challenged in Courts of law in certain cases.
• Once parties agree to arbitration, they cannot withdraw thereafter. Whereas in a conciliation process, parties are free to withdraw from proceedings.
• A conciliation is like a pre cursor to arbitration. If the process of conciliation fails, then parties could proceed to arbitration. To the extent, it is more informal dispute resolution mechanism as compared to arbitration.

Mediation

Mediation is yet another form of ADR. The core objective is like arbitration and conciliation – an alterative process of dispute resolution. Also, the arbitrator, conciliator or mediator must be unbiased and objective.

The major distinction – in mediation, the parties can take decisions. The mediator cannot make decisions or final judgment. The mediator can only convey the suggestions of each party to the other and give suggestions to enable them to arrive at an amicable settlement. Court of law can refer cases like divorce / separation to mediation if of the view that an amicable settlement can be arrived at. Typically, there is only one mediator unlike in arbitration or conciliation.  Mediation as an ADR mechanism has been in existence since time immemorial. Mediation has gained such significance that in 2023, the Mediation Act 2023 was passed by both houses of Parliament and partially enacted in India. The remaining provisions are expected to come into force soon.

Judicial settlement through Lok Adalat(s)

Though an ADR, Lok Adalat has been given a statutory authority under the Legal Services Authorities Act 1987. Such Adalat(s) can held at Taluk, District, State and National level. Even mobile Lok Adalat(s) are being organized across the country.

Typically, cases which are pending before Court or disputes which are likely to be filed before the Court will be heard in Lok Adalat(s). Non compoundable offences will not be heard in Lok Adalat. There is no fee involved in filing such cases. The final decision is considered a decree of the Court and is legally binding on parties. 

“Conflict is inevitable, but combat is optional.” said American author Max Lucado. Alternate dispute resolution mechanisms have gained prominence especially in the aftermath of the Covid 19 pandemic. Cost, time and money effective, it is now the preferred mode of resolving disputes amicably and within the realm of law.