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Future of ADR in India

"Keep The Option Of Going To Courts As Last Resort" -- CJI NV Ramana

Every legal system is trying to attain the legal idea that whenever there is wrong there must be a remedy so that no one shall have to take law into his own hands. Court has become overcrowded with litigation and large numbers of cases are pending in the court which ultimately leads to dissatisfaction among the people regarding the justice delivery system and its ability to dispense justice[1]. It is important that this dissatisfaction can be restored, and mechanism be adopted which do not have complexities of long drown litigation procedure but be as effective and binding on the parties adopting it.

Alternate Dispute Resolution is a panacea to almost all disputes which can be settled outside the court in an amicable manner. It is used since ages and through histories by innumerable countries and its people in an informal manner to address any conflict. In contemporary times, the uses of ADR have rather increased in an institutionalized manner by countries to address any problem arising out of international trade and business.

It is a technique through which the disputes can be settled without intervention of court proceeding. The main purpose of existence of ADR is to make available economical, easy, speedy and reachable justice[2]. ADR techniques are non-judicial body in nature which always deals with all controversial issues which can be resolved in the law through conformity among the parties and this idea inspired by most approved faith i.e., justice delayed is justice denied.

Meaning And Modes Of ADR

In today's context, ADR can be elucidated as the most amicable form of dispute resolution. A well-suited panacea to costly and time- consuming litigation or discord resolution. Litigation is utterly complex for a layman whereas ADR is a client friendly technique where a client fully understands his case and can track its progress.

An alternative for the cumbersome and needless litigation is provided by ADR. In general, a third party or independent person such as an ADR practitioner; mediator, negotiator, or conciliator is set to reach a proportionate and plausible decision making. ADR often exhaust a dispute at its initial stage and prevents the litigants to seeks courts assistance.

Types Of ADR In India

  1. Arbitration
    Arbitration, an alternative dispute resolution mechanism (ADR), is often described as "a binding voluntary alternative dispute resolution process by a private forum chosen by the Parties".

    It is inherently expected, that:
    If the Parties with their eyes wide open have consented to refer the matter to the arbitration, then normally the finding of the Arbitrator should be accepted without demur.

    Apparently, after the pronouncement of the arbitral award the Court(s) are expected to discharge a mere "supervisory role",

    In ONGC vs Saw Pipes[3], one of the first detailed judgment(s) analysing and interpreting Section 34 and Associate Builders vs DDA, that had the benefit of the ONGC judgment (supra), the Supreme Court painstakingly defined and re-defined, the limited scope of interference with arbitral awards.
     
  2. Mediation
    Mediation is an Alternative Dispute resolution where a third neutral party aims to assist two or more disputants in reaching agreement.

    It is an easy and uncomplicated party centered negotiation process where third party acts as a mediator to resolve dispute amicably by using appropriate communication and negotiation techniques.

    This process is totally controlled by the parties. Mediator's work is just to facilitate the parties to reach settlement of their dispute. Mediator doesn't impose his views and make no decision about what a fair settlement should be.

Conciliation
  • Conciliation is a form of arbitration but it is less formal in nature.
  • It is the process of facilitating an amicable resolution between the parties, whereby the parties to the dispute use conciliator who meets with the parties separately to settle their dispute
  • Conciliator meet separately to lower the tension between parties, improving communication, interpreting issue to bring about a negotiated settlement
  • There is no need of prior agreement and cannot be forced on party who is not intending for conciliation. It is different from arbitration in that way.

Lok Adalat
Lok Adalat is called 'People's Court' presided over by a sitting or retired judicial officer, social activists or members of Legal profession as the chairman. National Legal Service Authority(NALSA) along with other Legal Services Institutions conducts Lok Adalats on regular intervals for exercising such jurisdiction.

Any case pending in regular court or any dispute which has not been brought before any court of law can be referred to Lok Adalat. There is no court fees and rigid procedure followed, which makes the process fast. If any matter pending in court of referred to the Lok Adalat and is settled subsequently, the court fee originally paid in the court when the petition filed is also refunded back to the parties.

Parties are in direct interaction with the judge, which is not possible in regular courts. It depends on the parties if both the parties agree on case long pending in regular court can be transferred to Lok Adalat. The persons deciding the cases have the role of statutory conciliators only, they can only persuade the parties to come to a conclusion for settling the dispute outside the regular court in the Lok Adalat.

Legal Services Authorities (State or District) as the case may be on receipt of an application from one of the parties at a pre-litigation stage may refer such matter to the Lok Adalat for which notice would then be issued to the other party. Lok Adalats do not have any jurisdiction to deal with cases of non-compoundable offenses

Implications Of ADR In Indian Society

India is a country of 1.3 Billion where we have only 21.03 judges per million population[4] and approximately 4 crore cases are pending in various district court, about 59 lakhs in High courts and 70k in Supreme Court[5]. This makes expeditious trial a distant reality and the naïve judicial infrastructure with its slow rate of disposal further exacerbate the situation.

Contemporarily, the global bi-lateral, trilateral or multiliterate trade demands the expeditious dispute resolutions. National or international companies can't afford to lose 10-20 precious years to resolve simple disputes. More so it gives a major set- back to the economies.

The Constitution of India spells out egalitarian urges with socio-economic goals, imposing upon all the organs of the State the responsibility to promote the Constitutional ethos and the goals. The existence of a properly functioning justice system increases citizens' confidence and their willingness to bring disputes to court.

Unfortunately, the picture of the Indian legal system at present appears gloomy. In order to cope up with 1.3 billion population and provide them the inherent right of access to justice, can be done through ADR systems with more strength. The accelerated pressure upon the judicial system is to an extent reduced with empowering ADR system. ADR is the best suited option for the future of Indian dispute resolution and its ever growing economy.

Evolutionary Road Of ADR In India

Although, ADR is a young theoretical phenomenon but it has been practiced since ages by people and countries. In ancient India when there was Kulas, people used to live in joint families with their clans and when there was caste system prevalent in the society. The disputes among the kulas were resolved by the head of the of the family, clan or Kula. Likewise, when there was common trade, corporations or Shrenis among the people, they used to appoint person to resolve the disputes within the Shrenis.

Pre- Independence: British rule
During the British rule in India, many legislations were introduced and a drastic change came in the administration of India. In 1772, the courts were empowered to refer disputes to arbitration either at the request of the parties or by its own discretion. Then after a decade, in 1859 The Code of Civil Procedure was enacted, sections 312 to 327 of the act mentioned arbitration but in 1882 the sections relating to arbitration was repealed.

In 1899 The Indian Arbitration Act, 1899 was enacted to give effect to alternate dispute mechanism in India. The act was based on the English legislation.

Then in 1908, CPC was again amended and section 89 with second schedule gave wide powers to the courts to refer the disputes to ADR mechanism. Then, The Indian Arbitration Act, 1899 and section 89 read with second schedule of Code of Civil Procedure, 1908 were two effective legislation to deal with arbitration.

Thereafter, in 1937 Geneva Convention was signed and adopted by India and a parallel legislation was introduced in the form of The Arbitration (Protocol and Convention) Act, 1937. In 1940, The Indian Arbitration Act, 1899 and section 89 with second schedule of CPC was repealed and replaced by The Arbitration Act, 1940[6].

In local levels Panchayats were very effective in resolving the disputes in villages in India.

Post- Independence Era
The Arbitration (Protocol and Convention) Act, 1937 for the enforcement of foreign awards and The Arbitration Act, 1940 for referring disputes to ADR mechanism were presently in force in India. Then in 1961, India became signatory to the New York Convention and The Foreign Award (Recognition and Convention) Act, 1961 was enacted.

In 1981, in M/S Guru Nanak Foundation vs. Rattan Singh & Sons, the Supreme Court described the Arbitration Act, 1940 in off- quoted passage. It observed that "the way in which the proceedings under the act are conducted and without an exception challenged in courts, has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the act have become highly technical and accompanied by unending prolixity, at every stage providing a legal trap to the unwary."

In 1985, the UNCITRAL model law was adopted and signed by India on International commercial arbitration.

In 1996, finally The Arbitration (Protocol and Convention) Act, 1937; The Arbitration Act, 1940 and The Foreign Award (Recognition and Convention) Act, 1961 was repealed and consolidated in a single piece of legislation following the UNCITRAL model law, the act was called the Arbitration and Conciliation Act, 1996. to make the act more effective and efficient Section- 89 with Order- X (Rule- 1A to 1C) was re- introduced in CPC in 2002. The act of 1966 was amended twice in 2015 , 2019 and 2021. [7]

Contemporary Judicial Dogmas On ADR

In India ADR is a mechanism which puts forward the constitutionally enshrined principle of social, economical, and political justice. ADR is also embedded under Article 14 and Article 21 where it explains equality and right to life and liberty. Indian judicial interpretations roam around the validity of court jurisdiction and appointment of arbitrators and validity of award passed by such ADR procedures.

Section 89 of CPC states that, courts should provide a fair opportunity for parties to decide the settlement after observing the circumstances, and after all those observation a term of settlement must be framed by such court. With possible settlement methods such as Arbitration, conciliation, mediation and lok adalat parties will have the power to choose through implementing clauses in their agreement. Questions were raised for this said section which and duly amended citing the requirement of ADR for Indian dispute settlement including international aspects.

In the case of Emkay Global Financial Service Limited v. Giridhar Sondhi it was held that Arbitration Act aims at a speedy resolution of disputes[8].

Supreme Court in the case of Kinnari Mallick and anr vs. Ghansyam Das Damani held that a court has no jurisdiction for petition under section 34, and the power of court is limited. Such power can be invoked before setting aside a award with the consent of one party.

Again in another landmark judgment of Supreme Court the place of proceeding was questioned. In the case of Brahmani River Pellets Limited v. Kamachi Industries Limited, it was held that when parties decide a place of jurisdiction that excludes all other court. Exactly when parties decide a place for Arbitration in the contract itself, it excludes the jurisdiction of all other courts.

In case of In Konkan Railway Corporation v. Rani Construction Pvt. Ltd it was decided that court must help the parties in selecting a arbitrator rather than deciding the validity of arbitration clause.

S.B.P. & Co. v. Patel Engineering Ltd. It was held that it is the judiciary power of chief justice while appointing arbitrator.

Supreme Court invalidates the discretionary power of High court appointing sole arbitrator by stating that appointment must be made according to arbitration Agreement.

Supreme court in the case of Vinod Bhaiyalal Jain v. Wadhwani Parmeshwari Cold Storage Pvt. Co ., Ltd. Held that there should be no biasness in part of arbitrators in order to deliver proper justice to the parties.

Recent Trends And Future Possibilities In ADR

The covid-19 pandemic has a sweeping effect on how ADR functions in India at present. ADR has been potentially transformed into ODR(Online dispute resolution). ODR though a branch of ADR has emerged as the most preferred mode of dispute resolution outside courts. Traditionally, communication – both verbal and non-verbal in dispute resolution has existed without technology and required the physical presence of parties in a pre-identified, designated physical space.

However, the developments in ICT and increased access to the internet has brought into question this assumption– that effective communication and thereby dispute resolution, necessarily requires physical congregation.

In India, the judiciary has been leading the way. There have been several pivotal initiatives through the eCourts Mission Mode Project whose impact will percolate both vertically and laterally. However, to make dispute resolution far more effective, there is a need for an efficient framework that resolves disputes before they approach the courts. This Committee is concerned with creating one such framework, which builds on past efforts and takes a leap towards truly achieving the ideal enshrined in our Constitution -'access to justice' for all.

In the context of the pandemic, the judiciary has led the way by responding positively to the technological needs of the system. It has conducted a large volume of virtual hearings8 and as a result, the judiciary has in many ways redefined the very idea of a traditional judiciary synonymous with crowded court complexes, overflowing paper files and courtroom hearings. However, the successful use of technology has not been limited to just the courts but extended to other institutions. The Lok Adalat has been transformed into online versions- e-Lok Adalats.

fortunately, the current ecosystem and preparedness has been very promising. For instance, the judiciary has been unequivocal in its support for ODR both in terms of judges vocally recognizing its potential and in terms of the judicial decisions that have set the foundation for future ODR integration (such as the recognition of online arbitration or electronic records as evidence). The Executive, in the form of Government Departments and Ministries have also been leading the way.

For instance, the RBI released an ODR policy for digital payments, the MSME sector saw the introduction of the SAMADHAAN portal and the Department of Legal Affairs is in the process of collating the details of ODR service providers across the country.

Another aspect that makes India ODR ready is its legislative preparedness. Though in a piecemeal fashion, there are numerous support legislations which provide legislative backing for the ADR aspect of ODR (such as the Arbitration and Conciliation Act, 1996 or the Code of Civil Procedure, 1908) as well as the technology aspect of ODR (such as the Indian Evidence Act, 1972 and the Information and Technology Act, 2000). Further, India has also brought into force the United Nations Convention on International Settlement Agreements Resulting from Mediation, 2018 this year[9].

Understanding ODR

The concept of ODR is still evolving. At a preliminary level, ODR refers to the usage of ICT tools to enable parties to resolve their disputes. From instances seen around the world, in its first phase, ODR shares its fundamentals with ADR mechanisms such as negotiation, mediation and arbitration. To this extent, most of the early ODR efforts have mirrored ADR processes through aggregated use of simple ICT tools.

ODR however is not to be understood to mean just e-ADR. At a more advanced stage, ODR can work as the fourth party through the use of algorithmic assistance tools that help parties find resolutions. Such technology can take the form of intelligent decision support systems, smart negotiation tools, automated resolution, and machine learning.

Eventually, ODR can also offer multi-door dispute resolution through tailored processes for specific parties and their dispute. With the help of technology tools, these tailored processes can be designed to achieve an ideal dispute resolution for all the disputants.

Regulating Future Of ODR

Since ODR is still in its nascent stages of development in India, it is important that the governance framework encourages the growth of innovation both within the Government and in the private sector. To enable this, a balance has to be struck between protecting the rights and interests of its users while ensuring that over-regulation does not stifle innovation.

Benefits Of ODR

  1. Cost effective:
    The economic burden of dispute resolution often turns the process itself into a punishment and thereby hinders access to justice. In this light, ODR offers a cost effective mode of dispute resolution for the disputants as well as the Neutrals.
     
  2. Convenient and quick:
    The pendency of cases in Courts across India has been one of the major challenges for the justice system. As per the India Justice Report, 2019, in 21 States and Union Territories, cases in District Courts remain pending for 5 years on average or more. ODR can address such delays by providing a faster and more convenient process for resolution of disputes.
     
  3. Encourages dispute resolution:
    ODR can contribute significantly to improve access to a variety of dispute resolution processes by addressing major concerns such as lack of access to physical courts or ADR centres, cost of dispute resolution as well as the barriers due to disabilities.
     
  4. Limits implicit bias caused by human judgment:
    With the increased awareness regarding racial, caste and gender justice, there have been some concerns regarding the impact of biases, prejudice, and stereotype on decision-making processes and outcomes.

Conclusion
Currently, the dispute resolution framework in India is facing many long-standing challenges including the lack of efficiency and access. Due to delay in the disposal and high pendency in the traditional courts and tribunals, dispute resolution in India involves a high expenditure of time and resources. This has an adverse effect on the ease of doing business in India.

Though India has made recent advancements in the ease of doing business ranking released by the World Bank, the inefficiency of the dispute resolution framework prevents the country from providing an ideal environment for businesses and entrepreneurs.

The future of dispute resolution revolves around the ICT innovations and new ideas to make dispute resolution efficient and accessible for every section of the society.

ODR can play an important role in this aspect. Through easily accessible and user-centric processes, ODR can offer curated dispute resolution solutions for businesses, thereby enabling entrepreneurs to enforce contracts efficiently. Further, it can also provide an accessible mode of dispute resolution to masses which will eventually reduce the burden on the traditional court system.

End-Notes:
  1. https://www.law.cornell.edu/wex/alternative_dispute_resolution
  2. https://sociallawstoday.com/alternative-dispute-resolution-as-ultimate-resort/
  3. https://indiankanoon.org/doc/919241/
  4. https://www.livelaw.in/know-the-law/what-is-indias-judges-to-population-ratio-187497
  5. https://www.livelaw.in/news-updates/law-ministry-pending-court-cases-disposal-rate-judiciary-195918
  6. https://viamediationcentre.org/readnews/MzEx/Evolution-and-Codification-of-ADR-mechanism-in-India
  7. http://www.legalservicesindia.com/
  8. https://sociallawstoday.com/online-dispute-resolution-odr-system/

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