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Report No. 222

Alternative Dispute Resolution (ADR) in modern India

1.25 The first avenue where the conciliation has been effectively introduced and recognized by law is in the field of labour law, namely, Industrial Disputes Act 1947. Conciliation has been statutorily recognized as an effective method of dispute resolution in relation to disputes between workers and the management. The provision in the Industrial Disputes Act 1947 makes it attractive for disputing parties to settle disputes by negotiation and failing that through conciliation through an officer of the Government, before resorting to litigation.

1.26 In Rajasthan State Road Transport Corporation v. Krishna Kant, 1995 (5) SCC 75 , the Supreme Court observed:

"The policy of law emerging from Industrial Disputes Act and its sister enactments is to provide an alternative dispute-resolution mechanism to the workmen, a mechanism which is speedy, inexpensive, informal and unencumbered by the plethora of procedural laws and appeals upon appeals and revisions applicable to civil courts. Indeed, the powers of the courts and tribunals under the Industrial Disputes Act are far more extensive in the sense that they can grant such relief as they think appropriate in the circumstances for putting an end to an industrial dispute."

1.27 The only field where the courts in India have recognized ADR is in the field of arbitration. The arbitration was originally governed by the provisions contained in different enactments, including those in the Code of Civil Procedure; the first Indian Arbitration Act was enacted in 1899, which was replaced by the Arbitration Act 1940. The courts were very much concerned over the supervision of Arbitral Tribunal and they were very keen to see whether the arbitrator has exceeded his jurisdiction while deciding the issue which was referred to him for arbitration.

1.28 There was much delay in settlement of disputes between parties in law courts, which prevented investment of money in India by other countries. India has undertaken major reforms in its arbitration law in the recent years as part of economic reforms initially in 1991. The Arbitration and Conciliation Act of 1996 was thus enacted by the Parliament bringing in substantial reforms in arbitration, regarding domestic and international disputes.

1.29 The decision of the Supreme Court in Konkan Railway Corpn. Ltd. v. M/S. Mehul Construction Co., 2000(6) SCALE 71 , summarizes the evolvement of the Arbitration & Conciliation Act 1996 and the main provisions of the Act thus:

"4. At the outset, it must be borne in mind that prior to the 1996 Act, the Arbitration Act of 1940, which was in force in India provided for domestic arbitration and no provision was there to deal with the foreign awards. So far as the Foreign Awards are concerned, the same were being dealt with by the Arbitration (Protocol and Convention) Act, 1937, and the Foreign Awards (Recognition and Enforcement) Act, 1961.

The increasing growth of global trade and the delay in disposal of cases in Courts under the normal system in several countries made it imperative to have the perception of an alternative Dispute Resolution System, more particularly, in the matter of commercial disputes. When the entire world was moving in favour of a speedy resolution of commercial disputes, the United Nations Commission on International Trade Law way back in 1985 adopted the UNCITRAL Model Law of International Commercial Arbitration and since then number of countries have given recognition to that Model in their respective legislative system.

With the said UNCITRAL Model Law in view the present Arbitration and Conciliation Act of 1996 has been enacted in India replacing the Indian Arbitration Act, 1940, which was the principal legislation on Arbitration in the country that had been enacted during the British Rule. The Arbitration Act of 1996 provides not only for domestic arbitration but spreads its sweep to International Commercial Arbitration too.

The Indian law relating to the enforcement of Foreign Arbitration Awards provides for greater autonomy in the arbitral process and limits judicial intervention to a narrower circumference than under the previous law. To attract the confidence of International 6 2000 (6) SCALE 71 Mercantile community and the growing volume of India's trade and commercial relationship with the rest of the world after the new liberalisation policy of the Government, Indian Parliament was persuaded to enact the Arbitration and Conciliation Act of 1996 in UNCITRAL model and, therefore, in interpreting any provisions of the 1996 Act Courts must not ignore the objects and purpose of the enactment of 1996.

A bare comparison of different provisions of the Arbitration Act of 1940 with the provisions of the Arbitration and Conciliation Act 1996 would unequivocally indicate that 1996 Act limits intervention of Court with an arbitral process to the minimum and it is certainly not the legislative intent that each and every order passed by an authority under the Act would be a subject matter of judicial scrutiny of a Court of Law.

Under the new law the grounds on which an award of an Arbitrator could be challenged before the Court have been severely cut down and such challenge is now permitted on the basis of invalidity of the agreement, want of jurisdiction on the part of the arbitrator or want of proper notice to a party of the appointment of the arbitrator or of arbitral proceedings. The powers of the arbitrator have been amplified by insertion of specific provisions of several matters.

Obstructive tactics adopted by the parties in arbitration proceedings are sought to be thwarted by an express provision inasmuch as if a party knowingly keeps silent and then suddenly raises a procedural objection will not be allowed to do so. The role of institutions in promoting and organising arbitration has been recognised. The power to nominate arbitrators has been given to the Chief Justice or to an institution or person designated by him. The time limit for making awards has been deleted.

The existing provisions in 1940 Act relating to arbitration through intervention of Court, when there is no suit pending or by order of the court when there is a suit pending, have been removed. The importance of transnational commercial arbitration has been recognised and it has been specifically provided that even where the arbitration is held in India, the parties to the contract would be free to designate the law applicable to the substance of the dispute. Under the new law unless the agreement provides otherwise, the arbitrators are required to give reasons for the award.

The award itself has now been vested with status of a decree, inasmuch as the award itself is made executable as a decree and it will no longer be necessary to apply to the court for a decree in terms of the award. All these aim at achieving the sole object to resolve the dispute as expeditiously as possible with the minimum intervention of a Court of Law so that the trade and commerce is not affected on account of litigations before a court.

When United Nations established the Commission on International Trade Law it is on account of the fact that the General Assembly recognised that disparities in national laws governing international trade created obstacles to the flow of trade. The General Assembly regarded the Commission on International Trade Law as a medium which could play a more active role in reducing or removing the obstacles. Such Commission, therefore, was given a mandate for progressive harmonization and unification of the law of International Trade.

With that objective when UNCITRAL Model has been prepared and the Parliament in our country enacted the Arbitration and Conciliation Act of 1996 adopting UNCITRAL Model, it would be appropriate to bear the said objective in mind while interpreting any provision of the Act. The Statement of Objects and Reasons of the Act clearly enunciates that the main objective of the legislation was to minimise the supervisory role of Courts in the arbitral process."

1.30 The Family Courts 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. Section 5 of the Family Courts Act provides enabling provision for the Government to require the association of Social Welfare Organisations to help a Family Court to arrive at a settlement.

Section 6 of the Act provides for appointment of permanent counsellors to effect settlement in family matters. Further, Section 9 of the Act imposes an obligation on the Family Court to make efforts for settlement before taking evidence in the case. To this extent the ADR has got much recognition in the mater of settlement of family disputes. Similar provision is contained in Order XXXIIA CPC which deals with family matters.

According to section 4(4) (a) of the Act, in selecting persons for appointment as Judges for Family Courts, every endeavour shall be made to ensure that persons committed to the need to protect and preserve the institution of marriage and to promote the welfare of children and qualified by reason of their experience and expertise to promote the settlement of disputes by conciliation and counselling are selected.

1.31 Another right and welcome step taken was the enactment of the Consumer Protection Act 1986 for the settlement of consumers' disputes. The Act provides effective, inexpensive, simple and speedy redressal of consumers' grievances, which the civil courts are not able to provide. This Act is another example of ADR for the effective adjudication of consumers' disputes.

The Act provides for three-tier fora, that is, District Forum, State Commission and the National Commission for redressal of grievances of consumers. Large numbers of consumers are approaching these fora to seek quick redressal of their grievances. There has also been a spurt in social action litigation on behalf of consumers by Consumer Activists, Voluntary Consumer Organisations and other Social Action Groups.

1.32 Advantages of ADR:

(1) It is less expensive.

(2) It is less time-consuming.

(3) It is free from technicalities as in the case of conducting cases in law Courts.

(4) Parties are free to discuss their differences of opinion without any fear of disclosure of this fact before any law courts.

(5) Parties have the feeling that there is no losing or winning side between them but at the same time their grievance is redressed and their relationship is restored.

1.33 Justice in all its facets - social, economic and political - is required to be rendered to the masses of this country without any further loss of time - the need of the hour. The new strategy consists in dispute-resolution by conciliation, mediation and negotiation. The constitutional promise of securing to all citizens justice, social, economic and political, as promised in the Preamble of the Constitution, cannot be realised unless the three organs of the State, i.e., the legislature, the executive and the judiciary join together to find ways and means for providing to the Indian poor equal access to the State's justice system.

1.34 In Sitanna v. Marivada Viranna, AIR 1934 PC 105, the Privy Council affirmed the decision of the Panchayat in a family dispute. Sir John Wallis, J. stated the law in the following words:

"Reference to a village Panchayat is the time-honoured method of deciding disputes of this kind, and has these advantages, that it is comparatively easy for the panchayatdars to ascertain the true facts, and that, as in this case, it avoids protracted litigation which, as observed by one of the witnesses, might have proved ruinous to the estate. Looking at the evidence as a whole their Lordships see no reason for doubting that the award was a fair and honest settlement of a doubtful claim based both on legal and moral grounds, and are therefore of opinion that there is no grounds for interfering with it."

1.35 There is lot of flexibility in the use of ADR methods. The flexibility is available in the procedure as well as the way solutions are found to the dispute. The solutions can be problem-specific. The rigidity of precedent as used in adversarial method of disputeresolution will not come in the way of finding solutions to the disputes in a creative way.

1.36 If the ADR method is successful, it brings about a satisfactory solution to the dispute and the parties will not only be satisfied, the ill-will that would have existed between them will also end. ADR methods, especially mediation and conciliation not only address the dispute, they also address the emotions underlying the dispute.

In fact, for ADR to be successful, first the emotions and ego existing between the parties will have to be addressed. Once the emotions and ego are effectively addressed, resolving the dispute becomes very easy. This requires wisdom and skill of counselling on the part of the Mediator or Conciliator.

1.37 The ADR method is participatory and there is scope for the parties to the dispute to participate in the solution-finding process. As a result, they honour the solution with commitment. Above all, the ADR methods are cheaper and affordable by the poor also. As of now, there are some aberrations when it comes to the expenses incurred in arbitration.

In course of time, when there is good number of quality arbitrators, the expenses of arbitration will also decrease. The promotion of institutional arbitration will go a long way in improving the quality of ADR services and making them really cheaper.

1.38 The development of ADR methods will provide access to many litigants. It helps in reducing the enormous work-load that is put on the Judiciary. This will go a long way in improving not only the access to justice, but even the quality of justice.

1.39 We have discussed above about arbitration, which is a process of dispute-resolution between the parties through the arbitration tribunal appointed by the parties to the dispute or by the Chief Justice or a designate of the Chief Justice under section 11 of the Arbitration and Conciliation Act 1996. The parties have the option to go for Ad hoc arbitration or institutional arbitration depending on their convenience.

1.40 Ad hoc arbitration is arbitration agreed to and arranged by the parties themselves without recourse to an arbitral institution. In Ad hoc arbitration, if the parties are not able to agree as to who will be the arbitrator or one of the parties is reluctant to cooperate in appointing the arbitrator, the other party will have to invoke section 11 of the Arbitration and Conciliation Act 1996 whereunder the Chief Justice of a High Court or the Supreme Court or their designate will appoint the arbitrator.

In case of domestic arbitration, it will be the Chief Justice of a High Court or his designate. In case of international commercial arbitration, it will be the Chief Justice of India or his designate. In Ad hoc arbitration, the fee of the arbitrator will have to be agreed to by the parties and the arbitrator. The present Indian experience is that the fee of the arbitrator is quite high in Ad hoc arbitration.

Need for Justice - dispensation through ADR etc. Back

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