ALTERNATIVE DISPUTE RESOLUTION

A PROJECT REPORT
SUBMITTED TO ARMY INSTITUTE OF LAW
IN PARTIAL FULFILMENT OF THE REQUIREMENT
FOR THE DEGREE
OF
B.A. L.LB
FIFTH YEAR
2018-2019

CRITICAL STUDY OF ADR METHODS IN

INDIA

SUBMITTED BY: JUHI BHUTANI

ROLL NO. 1471
 INTRODUCTION-

Indian judiciary is one of the oldest judicial system, a world-renowned fact but nowadays it is also
well-known fact that Indian judiciary is becoming inefficient to deal with pending cases, Indian
courts are clogged with long unsettled cases. The scenario is that even after setting up more than a
thousand fast track Courts that already settled millions of cases the problem is far from being
solved as pending cases are still piling up. To deal with such a situation Alternative Dispute
Resolution (ADR) can be helpful mechanism, it resolves conflict in a peaceful manner where the
outcome is accepted by both the parties. It resolves dispute in less time and in a cost effective
manner and produces the desired result. The concept of Alternative Dispute Resolution (ADR)
mechanism is capable of providing a substitute to the conventional methods of resolving disputes.
ADR offers to resolve all type of matters including civil, commercial, industrial and family etc.,
where people are not being able to start any type of negotiation and reach the settlement. Generally,
ADR uses neutral third party who helps the parties to communicate, discuss the differences and
resolve the dispute. It is a method which enables individuals and group to maintain co-operation,
social order and provides opportunity to reduce hostility.1 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 Indian firms.2 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 rough handling of situations. It
is a movement with a drive from evolving positive approach and attitude towards resolving a
dispute.3

Settlement of disputes through reference to a third party is a part of the volkgiest of India since
times immemorial. It has undergone a phenomenal metamorphosis, growing from the stage of
village elders sitting under a banyan tree and resolving disputes to the stage of gaining a statutory
recognition. India has put in place a progressive piece of legislation which is essentially based on
the Model Law and the UNCITRAL Arbitration Rules. The Parliament enacted the Arbitration and

1
https://blog.ipleaders.in/adr-alternative-dispute-resolution/ last visited on 24th August 2018
2
Krishna Sarma, Momota Oinam & Angshuman Kaushik, “Development and Practice of Arbitration in India –
Has it Evolved as an Effective Legal Institution”, http://iis-
db.stanford.edu/pubs/22693/No_103_Sarma_India_Arbitration_India_509.pdf, (August 20,2012,10:30 pm).
3
Madhubhushi Sridhar, LexisNexis Butterworths, Alternative Dispute Resolution: Negotiation and Mediation,
at 1, (1st Ed. 2006).
Conciliation Act of 1996 with a view to making arbitration less technical and more useful and
effective, which not only removes many serious defects of the earlier arbitration law, but also
incorporates modern concepts of arbitration. What it now needs is inculcation of the culture of
arbitration within the bar, the bench and the arbitral community.4

History-

In India, the law and practice of private and transactional commercial disputes without court
intervention can be dated back to ancient times. Arbitration or mediation as an alternative to
dispute resolution by municipal courts has been prevalent in India from Vedic times. The earliest
known treatise is the Bhradarnayaka Upanishad, in which various types of arbitral bodies viz (i)
the Puga (ii) the Sreni (iii) the Kula are referred to. These arbitral bodies, known as Panchayats,
dealt with variety of disputes, such as disputes of contractual, matrimonial and even of a criminal
nature.5 The disputants would ordinarily accept the decision of the panchayat and hence a
settlement arrived consequent to conciliation by the panchayat would be as binding as the decision
that was on clear legal obligations.

The Muslim rule in India saw the incorporation of the principles of Muslim law in the Indian
culture. Those laws were systematically compiled in the form of a commentary and came to be
known as Hedaya. During Muslim rule, all Muslims in India were governed by Islamic laws-
the Shari’ah as contained in the Hedaya. The Hedaya contains provisions for arbitration as well.
The Arabic word for arbitration is Tahkeem, while the word for an arbitrator is Hakam. An
arbitrator was required to posses the qualities essential for a Kazee– an official Judge presiding
over a court of law, whose decision was binding on the parties subject to legality and validity of the
award. The court has the jurisdiction to enforce such awards given under Shari’ah though it is not
entitled to review the merits of the dispute or the reasoning of the arbitrator.6

ADR picked up pace in the country, with the coming of the East India Company. The British
government gave legislative form to the law of arbitration by promulgating regulations in the three
presidency towns: Calcutta, Bombay and Madras. Bengal Resolution Act, 1772 and Bengal
Regulation Act, 1781 provided parties to submit the dispute to the arbitrator, appointed after mutual

4
S.Chaitanya Shashank, ADR in India: Legislations and Practices, last visited on 24th August 2018,
https://www.lawctopus.com/academike/arbitration-adr-in-india/
5
O P Malhotra, Indu Malhotra, Lexis Nexis, The Law and Practice of Arbitration and Conciliation (2 nd ed.,
2006)
6
Ibid at 4
agreement and whose verdict shall be binding on both the parties.7 These remained in force till the
Civil Procedure Code 1859, and were extended in 1862 to the Presidency towns.

ADR METHODS-

A.ARBITRATION -The definition of ‘arbitration’ in section 2(1) (a) verbatim reproduces the text
of article 2(a) of the Model Law-‘arbitration means any arbitration whether or not administered by
a permanent arbitral institution’8It is a procedure in which the dispute is submitted to an arbitral
tribunal which makes a decision (an “award”) on the dispute that is binding on the parties.9 It is a
private, 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.10

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
parties.11Hence it follows that if the forum chosen is not required to act judicially, the process it is
not arbitration.12

TYPES OF ARBITRATION ARE:

1.Ad Hoc Arbitration

An ad hoc arbitration is one which is not administered by an institution and therefore, the parties
are required to determine all aspects of the arbitration like the number of arbitrators, manner of
their appointment, etc. Provided the parties approach the arbitration in a spirit of cooperation, ad
hoc proceedings can be more flexible, cheaper and faster than an administered proceeding. The
advantage is that, it is agreed to and arranged by the parties themselves. However, the ground
realities show that arbitration in India, particularly ad hoc arbitration, is becoming quite expensive
vis-à-vis traditional litigation.

7
Ivneet Walia, Alternate Dispute Resolution And The Common Man, (Feb. 28,
2009), http://www.legalserviceindia.com/article/l312-Alternate-Dispute-Resolution-And-The-Common-
Man.html
8
Ibid at 5
9
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).
10
Ibid at 6
11
Pride of Asia Films v Essel Vision (2004) 3 Arb. LR 169, 180 (Bom)
12
Supra note 10
2.Institutional Arbitration

An institutional arbitration is one in which a specialized institution with a permanent character

intervenes and assumes the functions of aiding and administering the arbitral process, as
according to the rules of that institution. It is important to note that these institutions do not
arbitrate the dispute, it is the arbitrators who arbitrate, and so the term arbitration institution is
inapt and only the rules of the institution apply. Incorporation of book of rules in the “arbitration
agreement” is one of the principle advantages of institutional arbitration. Institutional Arbitration,
throughout the world, is recognized as the primary mode of resolution of international commercial
disputes. It is an arbitration administered by an arbitral institution.13

Further, in many arbitral institutions such as the International Chamber of Commerce (ICC),
before the award is finalized and given, an experienced panel scrutinizes it. As a result, the
possibilities of the court setting aside the award is minimal.

3.Statutory Arbitration

When a law specifies that if a dispute arises in a particular case it has to be referred to arbitration,
the arbitration proceedings are called “statutory arbitration”. Section 2(4) of the Arbitration and
Conciliation Act 1996 provides, with the exception of section 40(1), section 41 and section 43,
that the provisions of Part I shall apply to every arbitration under any other act for the time being
in force in India.14

 Initially, applicant initiates an arbitration by filing a statement of claim that specifies the
relevant facts and remedies. The application must include the certified copy of arbitration
agreement.
 Statement of claim is a written document filed in the court or tribunal for judicial
determination and a copy also send to the defendant in which claimant described the facts in
support of his case and the relief he seeks from the defendant.
 The respondent reply to the arbitration by filing an answer against the arbitration claim of
claimant that specifies the relevant facts and available defenses to the statement of claim.
 Arbitrators selection is the process in which the parties receive lists of potential arbitrators
and select the panel to hear their case.

13
A Consultation Paper, Proposed Amendments to the Arbitration and Conciliation Act, 1996, Ministry of Law
and Justice, Government of India, at 18.
  Then there is the exchange of documents and information in preparation for the hearing
called ‘Discovery’.
 The parties meet in persons to conduct the hearing in which the parties present the arguments
and evidences in support of their respective cases.
 After the witnesses examined and evidences are presented, then there in conclusion arbitrator
gives an ‘Award’ which is binding on the parties.

Now the intricacies of the proceedings vary with the arbitration agreement. For example, there
could be a timeline which must be followed. This timeline would be stipulated in the agreement.
Section 8 of Arbitration and Conciliation Act, 1996 provides if any party disrespects the arbitral
agreement and instead of moving to arbitration, moves that suit to civil court, other party can
apply the court for referring the matter to arbitration tribunal as per the agreement but not later the
submission of the first statement. The application must include a certified copy of arbitration
agreement and if courts satisfy with it, the matter will be referred to arbitration.15

B.MEDIATION- Mediation is a process in which the mediator, an external person, neutral to the
dispute, works with the parties to find a solution which is acceptable to all of them.16 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
dynamics of negotiations.17 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.

15
https://blog.ipleaders.in/adr-alternative-dispute-resolution/ last visited on 23rd August 2018.
16
Sriram Panchu, LexisNexis, Mediation: Practice and Law, at 9, (2011).
17
Goldberg, et al Aspen Publishers, Dispute Resolution: Negotiation, Mediation, and Other Processes, at 107
(5th ed., 2007).
 the commencement of mediation process, the mediator shall ensure the parties and their
counsels should be present.

 Initially in the opening statement he furnishes all the information about his appointment and
declares he does not have any connection with either of parties and has no interest in the dispute.
 In the joint session, he gathers all the information, understand the fact and issues about the
dispute by inviting both the parties to present their case and put forward their perspective
without any interruption. In this session, mediator tries to encourage and promote
communication and manage interruption and outbursts by the parties.
 Next is separate session, where he tries to understand the dispute at a deeper level, gathers
specific information by taking both the parties in confidence separately.
 Mediator asks frequent questions on facts and discusses strengths and weaknesses to the parties
of their respective cases.
 After hearing both the sides, mediator starts formulating issues for resolution and creating
options for settlement.
 In the case of failure to reach any agreement through negotiation in mediation, mediator uses
different Reality check technique.

C. NEGOTIATION- It is a 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.

D.Conciliation- 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 facilitates communication between parties in an attempt to help them settle their
differences”.18 This consists in an attempt by a third party, designated by the litigants, to reconcile

18
Garner, Black’s Law Dictionary (9th ed.,2009)
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 proceeding

E. 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.
 CRITICAL STUDY

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 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 successful judicial system.19

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

Advantages of adr methods-

1.More flexibility. In the case of arbitration, the parties have far more flexibility to select
what procedural and discovery rules will apply to their dispute (they can choose to apply relevant
industry standards, domestic law, the law of a foreign country, etc.).
2.Select your own Arbitrator or Mediator. The parties can often select the arbitrator
or mediator that will hear their case, typically selecting someone with expertise in the substantive
field involved in the dispute. The arbitrator (or panel members) need not even be an attorney. In
this way the focus can be on the substantive issues involved rather than on technical procedural
rules. In normal litigation, the parties cannot select the judge, and the judge and/or jury may often
need expert witnesses to explain extremely complex issues. The greater the expertise of the
arbitrator, the less time that needs to be spent bringing him up to speed.
3. A JURY IS NOT INVOLVED. Juries are unpredictable and often damage awards are based solely
on whether they like the parties or are upset at one party because of some piece of evidence such as
a photo that inflames the passion of the jury. Juries have awarded claimants damages that are well
above what they would have received through alternative dispute resolution; and they have also
done the opposite.
4. Expenses are reduced. Attorneys and expert witnesses are very expensive. Litigating a
case can easily run into the tens of thousands of dollars. Alternative dispute resolution offers the
benefit of getting the issue resolved quicker than would occur at trial – and that means less fees
incurred by all parties.
5. ADR is speedy. Trials are lengthy, and in many states and counties it could take years to have
a case heard by a judge or jury. Appeals can then last months or years after that. In a matter of

19
Government of India, Law Commission of India, 222 nd report, ’Need for Justice-dispensation through ADR
etc.’, at ¶ 1.69.
hours, an arbitrator often can often hear a case that otherwise may take a week in court to try with
live witnesses. With arbitration, the evidence can be submitted by documents rather than by
testimony presented through witnesses. ADR can be scheduled by the parties and the panelist as
soon as they are all able to meet together.
6. The results can be kept confidential. The parties can agree that information
disclosed during negotiations or arbitration hearings cannot be used later even if litigation ensues.
The final outcome can also be made private if the parties so stipulate and agree. On the other hand,
most trials and related proceedings are open to the public and the press.
7. Party participation. ADR permits more participation by the litigants. ADR allows the

parties the opportunity to tell their side of the story and have more control over the outcome than
normal trials overseen by a judge. Many parties desire the opportunity to speak their piece and tell
their side of the story in their own words rather than just through counsel.
8. Fosters cooperation. ADR allows the parties to work together with the neutral arbitrator
or mediator to resolve the dispute and come to a mutually acceptable remedy.

DISADVANTAGES OF ADR METHOD

1. There is no guaranteed resolution. With the exception of arbitration, alternative

dispute resolution processes do not always lead to a resolution. That means it is possible that you
could invest the time and money in trying to resolve the dispute out-of-court and still end up having
to proceed with litigation and trial before a judge or jury.
2. Arbitration decisions are final. With very few exceptions, the decision of a neutral

arbitrator cannot be appealed, with fraud being an obvious exception. Additionally, some states will
not enforce decisions of arbitrators that are patently unfair, a high standard to meet. Another ground
for setting aside an award is if the arbitrator’s decision exceeded the scope of the arbitration clause
or agreement. Some arbitration clauses are broad, others are narrowly limited to specific disputes.
Decisions of a court, on the other hand, usually can be appealed to an appellate court for a variety
of legal grounds and for numerous alleged procedural errors.
3. Limits on Arbitration Awards. Arbitrators can only resolve disputes that involve
money. They cannot issue orders compelling one party to do something, or refrain from doing
something (also known as injunctions). For example, Arbitrators generally cannot change title to
real property. Of course this is subject to the specific language of the arbitration clause.
4. Discovery limitations. Some of the procedural safeguards designed to protect parties in
court may not be present in ADR, such as the liberal discovery rules used in U.S. courts, which
make it relatively easy to obtain evidence from the other party in a lawsuit.
5. Fee for the Neutral . The neutral mediator or arbitrator charges a fee for his or her

services. Depending on the arbitrator or mediator selected, the fees can be substantial (of course the
parties typically agree to divide the fees between themselves). Depending on the contract language
and state law, a prevailing party can be awarded fees and costs. A judge on the other hand, charges
no fees for his services.
6. May have no choice. Often the contract in dispute contains a broadly worded mandatory
arbitration clause. Many lease agreements and employment contracts, for example, contain
mandatory arbitration provisions, as do operating agreements and other types of business contracts.
Unless both parties waive arbitration, most states will compel arbitration at the request of any party.
7. Non-binding arbitration. Sometimes the court may order nonbinding or Judicial
Arbitration. This means that if a party is not satisfied with the decision of the arbitrator, they can
file a request for trial with the court within a specified time period after the arbitration award.
Depending on the process ordered, if that party does not receive a more favorable result at trial,
they may have to pay a penalty or fees to the other side.

Conclusion
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.
 BIBLIOGRAPHY

1. N.K. Acharaya ‘Law relating to Arbitration and ADR’, Asia Law House, 2e.d.

2. Madhusudan Saharay ‘Arbitration and Conciliation with Alternative Dispute Resolution’,

Universal Law Publishing House, 2e.d.

3. O.P. Tiwari ‘ Arbitration and Conciliation Act 1996 with ADR’, Allahabad Law Agency,5e.d.

4. DR. N.V. Paranjape ‘ Law relating to Arbitration and Conciliation’ Central Law Agency,5e.d.

5. Avtar Singh ‘Law of Arbitration and Conciliation and ADR’, Eastern Book Company,10e.d.