ADR

Asst Prof Nithin Rajeev, ISBR Law College

◦ As the saying goes, “The spirit of the law, not its letter, is what gives life to justice.”
Lord Justice Earl Warren
◦ With the advent of the idea of Conflict Management via Alternative Dispute Resolution
(ADR), a new, less adversarial method of settling legal disputes has become available.
Legally speaking, a lawsuit is a “lis inter partes,” however the Indian legal system has
developed an alternative to adversarial litigation known as the ADR Mechanism.
◦ There has been a dramatic increase in the number of cases filed in Indian courts in
recent years, leading to pendency and delays and underscoring the need for alternate
dispute resolution techniques. In light of these concerns, on December 4, 1993, the
then-Prime Minister of India and the then-Chief Justice of India convened a conference
in New Delhi at which the Chief Ministers and Chief Justices of the States adopted a
Resolution.
◦ It read: “The heads of government and the highest judges agreed that the courts
couldn’t handle everything and that some conflicts were better suited to being settled
through arbitration, mediation, or negotiation. They stressed the value of parties to a
disagreement using alternative dispute resolution, which can provide procedural
flexibility, save time and money, and reduce the emotional and mental strain of going
to trial “.
◦ Alternative Dispute Resolution
◦ 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.
◦ Importance of ADR in India
◦ To deal with the situation of pendency of cases in courts of India, ADR plays a
significant role in India by its diverse techniques. Alternative Dispute Resolution
mechanism provides scientifically developed techniques to Indian judiciary which helps
in reducing the burden on the courts. ADR provides various modes of settlement
including, arbitration, conciliation, mediation, negotiation and lok Adalat. Here,
negotiation means self-counseling between the parties to resolve their dispute but it
doesn’t have any statutory recognition in India.
◦ ADR is also founded on such fundamental rights, article 14 and 21 which deals with
equality before law and right to life and personal liberty respectively. ADR’s motive is to
provide social-economic and political justice and maintain integrity in the society
enshrined in the preamble. ADR also strive to achieve equal justice and free legal aid
provided under article 39-A relating to Directive Principle of State Policy(DPSP).
◦ PROVISIONS RELATED TO ADR
• Section 89 of the Civil Procedure Code, 1908 provides that opportunity to the people, if
it appears to court there exist elements of settlement outside the court then court
formulate the terms of the possible settlement and refer the same for: Arbitration,
Conciliation, Mediation or Lok Adalat.
• The Acts which deals with Alternative Dispute Resolution are Arbitration and Conciliation
Act, 1996 and,
• The Legal Services Authority Act, 1987
Advantages of Alternative Dispute Resolution
• Less time consuming: people resolve their dispute in short period as compared to courts
• Cost effective method: it saves lot of money if one undergoes in litigation process.
• It is free from technicalities of courts, here informal ways are applied in resolving
dispute.
• People are free to express themselves without any fear of court of law. They can reveal
the true facts without disclosing it to any court.
• Efficient way: there are always chances of restoring relationship back as parties discuss
their issues together on the same platform.
• It prevents further conflict and maintains good relationship between the parties.
• It preserves the best interest of the parties.
◦ What are the disadvantages?
◦ There is no guaranteed resolution
◦ The alternative resolution process does not always lead to a resolution.
◦ This means that the parties could invest 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 and jury.
◦ Decisions are final
◦ With few exceptions such as fraud, the decision of a neutral arbitration cannot be appealed
against. On the other hand, decisions of a court usually can be appealed on a variety of legal
grounds.
◦ Limit on Awards
◦ There is no equivalent of s.66 of the Arbitration Act 1996 (which provides that an award made
by the tribunal pursuant to an arbitration agreement may be enforced in the same manner as
a judgment or order of the court to the same effect) enabling ADR awards to be enforced as if
they were court judgment.
◦ However, the awards are not so easily enforceable.
◦ Arbitrations mostly resolve disputes that involve money. They cannot issue orders compelling
one party to do something, or refrain from doing something; hence, they cannot give
injunctions.
◦ Facts may not be fully disclosed
◦ Because there is no equivalent of disclosure in arbitration as in litigation, there is a risk
that the parties may resolve a dispute without knowing all the facts, which may lead to
a wrong decision.
◦ For example most businessmen, however, believed that a quick decision is better than
wasting time and money on a dispute in order to get a correct decision.
◦ ADR is not for all cases
◦ Alternative dispute resolution is not appropriate where criminal law is involved, where
there is no dispute to resolve and where the client needs a ruling on a point of law.
◦ Arbitration
◦ Arbitration, a type of alternative dispute resolution (ADR), is a strategy for resolving
conflicts outside of the court system in which the parties to a disagreement refer it to
one or more people, known as arbitrators, to whom they intend to be bound by their
judgement. It is a method of dispute settlement in which a third person examines the
evidence in the case and renders a legally enforceable decision for both parties.
Arbitration awards have limited right of review and appeal.

◦ Arbitration is not the same as civil and mediation proceedings. Arbitration can be
optional, or mandatory. Clearly, mandatory arbitration can only come from a law or
arrangement that is mutually signed where the parties agree to arbitrate all current or
future disputes without necessarily knowing what disputes will ever occur. In India, if
the matter is referred to Arbitration then the provisions of the Arbitration and
Conciliation Act, 1996 will apply.
◦ CONCILIATION

◦ Conciliation is a cooperative mechanism through which the conciliator, a qualified and

professional neutral, facilitates negotiations between the disputing parties and assists
them in recognizing their differences and desires in order to reach an arrangement that
is mutually acceptable.
◦ Once a settlement has been found before a conciliator between the parties to the
conflict, the resolution has the effect of an arbitration award and is legally tenable in any
court in the country. Many trade disputes, in which it is not necessary that a binding and
enforceable decision should take place, are subject to conciliation. Conciliation may be
especially appropriate where the parties to the conflict seek to preserve and sustain
their commercial relations.
◦ Mediation
◦ Today, mediation is a voluntary and informal method of dispute resolution throughout
the world. It is a simple, voluntary, party-centered and structured negotiation process in
which a neutral third party helps parties resolve their disputes friendly through the use
of specified communication and negotiation techniques. Mediation is a process where
the parties are themselves in control of it. The mediator’s role is strictly that of a
facilitator, assisting the parties in reaching a negotiated settlement of their
disagreement.
◦ The mediator takes no decisions and does not enforce his opinion on what should be a fair
settlement. Both sides meet with an experienced neutral mediator during the mediation
process. The session starts with each side explaining the issue from their point of view, and
the remedy they seek. Once the respective views of each party is discussed, the mediator
then splits them into private rooms, initiating a “caucus conference” process and then “joint
meetings with the parties.
◦ Both sides agree to the limit. The mediator does not have the power to dictate his decision
regarding the party. Mediation allows a conflict to be handled swiftly, with minimal stress and
expense, while still preserving the parties’ relationship and maintaining anonymity.
◦ Negotiation
Negotiation is the process which helps people settle their differences and disputes. It is the
method by which amicable agreement is reached avoiding arguments.The term 'Negotiation'
can be defined as a direct or indirect form of communication through which the parties with
conflicting interest deliberate a form of Joint Action aiming to resolve the dispute between them.
Negotiation can be used either to resolve any existing problem or for a future relationship
between two or more parties by setting a ground work.The presence of negotiation can be
found at all aspects of everyday life whether at individual level, Institutional level, National level
or global level. Negotiation therefore has been characterized as the preeminent mode of
dispute resolution.
◦ LOK ADALAT
◦ Lok Adalat is one of the alternative dispute redressal mechanisms, it is a forum where
disputes/cases pending in the court of law or at the pre-litigation stage are settled/
compromised amicably.
◦ Lok Adalats have been given statutory status under the Legal Services Authorities Act,
1987. Under the said Act, the award (decision) made by the Lok Adalats is deemed to be a
decree of a civil court and is final and binding on all parties and no appeal against such an
award lies before any court of law.
◦ If the parties are not satisfied with the award of the Lok Adalat though there is no
provision for an appeal against such an award, but they are free to initiate litigation by
approaching the court of appropriate jurisdiction by filing a case by following the required
procedure, in the exercise of their right to litigate.
 International Conventions on ADR
◦ Introduction:
◦ After the great economic crisis of 1929 and the Second World War which disrupted the
world, some large-economy countries like the US, Britain, and others took care of the
reorganization of the post-war world. They took to International trading to rebuild their
economy and promoting the free flow of goods, services, and technology throughout the
world without any restrictions.
◦ This steered to various multilateral agreements signed among different countries of the
word. This further lead to the formation of various new organizations such as the UN,
World Bank, IMF, etc. to promote International Trade. The growth of international trade
was bound to give rise to international disputes beyond the geographical limitations. In
settling those commercial disputes in international business ADR regime was required to
solve cross border commercial disputes.
◦ The biggest progress in the direction of International ADR is the adoption of the UNCITRAL
(United Nations Commission on International Trade Law) model in international arbitration.
The remarkable feature of this model is that it has uniformly regularized the concept of
arbitration and conciliation to implement it for global application.
◦ United Nations has suggested its member nations to implement this model in their domestic
legislation to have uniform laws for ADR globally. In this direction various International
conventions and treaties have been formed to establish and promote ADR mechanisms
worldwide such as The Geneva Protocol on Arbitration Clauses of 1923; The Geneva
Convention on the execution of the foreign award, 1927; The New York Convention of 1958 on
the recognition and enforcement of foreign arbitral award.
◦ UNCITRAL (United Nations Commission on International Trade Law) model in
international arbitration.
• Following are the binding principles:
• Party Autonomy:
It lays down the parties with unprejudiced platform to have substantial control over the
process for the removal of disputes. Parties are also provided with the option to alter the needs
& requirements.

• Separability:
The arbitration clause in the contract is liberated and stays stand even if the substantial
contract get invalid or becomes void. As per the Arbitration & Conciliation Act, 1996, an
arbitration maybe in the form of as a clause in a contract or a separate agreement.
• Competence:
competence: Competency of an arbitral tribunal is of utmost importance to rule in its
own jurisdiction. This principle is given recognition by numerous convention on
international arbitration.

• Territorial Principle:
As the name suggests, it facilitates the tribunal to regulate people & events within its
jurisdiction, with barring the tribunal to regulate the people & events outside its
boarders.

• Enforceability:
It takes care & mandates that the decision resolving the dispute the executed in all the
nation concerning the mention dispute in hand. Also, to accommodate the winning party
to credit the assets of losing party based in & around the world.
◦ 1923 Geneva Protocol on Arbitration Clauses
◦ In this protocol, it was recognized by the contracting parties that if any differences
may arise in between them for any contract relating to the commercial matter, then
they’ll agree to submit those differences to arbitration, or if any other matter that may
be resolved by arbitration, they agree to submit to that irrespective of that arbitration
takes place in the origin countries of the contracting parties.
◦ Under this protocol, disputes that may be settled through arbitration were restricted to
only commercial disputes under their respective domestic laws. The procedure of
arbitration through this protocol was to be decided by the will of parties and by the
respective domestic legislation of the place where arbitration was to take place.
◦ The execution of the arbitration was to take place through the respective national
legislation of the contracting parties and their respective national authorities. This
protocol could be denounced by the contracting party or state on giving a notice of
one year. Such criticism was effected after the date on which the secretary general of
the league of nations was notified of it and was in operation from that date after the
notification. On behalf of any territory of contracting parties, they could also denounce
after the notification to the secretary-general.
◦ 1927 Geneva Convention on the Execution of Foreign Arbitral Awards
◦ In this convention, it was laid down that the enforcement of award could be refused by
the contracting parties even if the conditions which were formulated in the article were
fulfilled subject to whether the conditions laid down in Article 2 are fulfilled or not.
◦ Some grounds were provided on which the award could be annulled. These are
mentioned as follows:
• It is annulled in the country in which that award was made.
• The party against whom the contracting party sought to use award was not provided
with sufficient time to present his case or was not properly represented because of any
legal incapacity.
• If the difference between the contracting parties decided in such arbitration was beyond
the scope of terms of submission to arbitration.
• If all the questions which were submitted to the arbitral tribunal were not covered by the
award, if the competent authority where that award’s enforcement was sought, deemed
fit, it could have postponed such enforcement or may also grant such award subject to
such guarantee that competent authority deemed fit
 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)

◦ This Convention provided for the uniform legislative standards for recognition of arbitral
awards and agreements or recognition of courts which are treated as ‘foreign’ under
legislation due to some “foreign element” in its proceedings. This is known as the
Convention on the recognition and enforcement of foreign arbitral awards and
commonly known as the New York Convention. This convention was made for the
recognition of the rising importance of international arbitration as a method of settling
disputes.
◦ The objective behind this convention was the prevention of discrimination between the
foreign arbitral award and domestic arbitral awards. It compels contracting parties to
recognize and enforce foreign and non-domestic awards in the same way as any
domestic award is capable of in the national legislations of the contracting parties.
◦ A secondary aim of the Convention is to require courts of parties to give full effect to
arbitration agreements by requiring courts to deny the parties access to court in
violation of their agreement to refer the matter to an arbitral tribunal. This convention
relates to the enforcement and recognition of foreign awards i.e. their field of
application.
◦ However, any foreign arbitral award may be refused subject to certain grounds provided
in the convention. These grounds may be pointed out as:
• Lack of valid arbitration agreement
• Violation of due process.
• Excess of the arbitral tribunal’s authority.
• Irregularity in the composition of the arbitral tribunal or arbitral procedure.
• The award “has not yet become binding”, “has been set aside”, or “has been
suspended”
◦ What is Arbitration?
◦ Arbitration is a mechanism of dispute resolution with the intervention of a third person (or
more persons) but without the involvement of court of law. The settlement of the dispute
that is arrived the judgment of the third person (or more persons) who are called Arbitrators.
◦ The parties to the dispute repose confidence in the judgment of the Arbitrator and show
their willingness to abide by his decision. The essence of Arbitration is thus based on the
principle of resolving dispute without the intervention of court of law and enabling the
parties to the dispute to resolve their disputes by a domestic tribunal.
◦ Historical Background
◦ Arbitration has a long history in India. In ancient times, people often voluntarily submitted
their disputes to a group of wise men of a community—called the panchayat—for a binding
resolution. The panchayati raj system has found its place in various laws in India. Modern
arbitration law in India was created by the Bengal Regulations in 1772, during the British
rule.
◦ The Bengal Regulations provided for reference by a court to arbitration, with the consent of
the parties, in lawsuits for accounts, partnership deeds, and breach of contract, amongst
others. Until 1996, the law governing arbitration in India consisted mainly of three statutes:
(i) the 1937 Arbitration (Protocol and Convention) Act, (ii) the 1940 Indian Arbitration Act,
and (iii) the 1961 Foreign Awards (Recognition and Enforcement) Act.
◦ The 1940 Act was general law governing arbitration in India along the lines of the
English Arbitration Act of 1934, and both the 1937 and the 1961 Acts were designed to
enforce foreign arbitral awards (the 1961 Act implemented the New York Convention of
1958) The government enacted the Arbitration and Conciliation Act, 1996 (the 1996 Act)
in an effort to modernize the outdated 1940 Act.
◦ The 1996 Act is a comprehensive piece of legislation modeled on the lines of the
UNCITRAL (United Nations Commission on International Trade Law) Model Law. This Act
repealed all the three previous statutes (the 1937 Act, the 1961 Act and the 1940 Act).
Its primary purpose was to encourage arbitration as a cost-effective and quick
mechanism for the settlement of commercial disputes. The 1996 Act covers both
domestic arbitration and international commercial arbitration.
◦ Types of Arbitration Practice - Institutional Arbitration and Ad Hoc Arbitration
◦ Arbitrations conducted in India are mostly ad hoc. Although, the concept of institutional
arbitration is gradually creeping in the arbitration system in India but, it has yet to make
an impact. The advantages of institutional arbitration over ad hoc arbitration in India
need no emphasis and the wide prevalence of ad hoc arbitration has its ramifications in
affecting speedy and cost effectiveness of the arbitration process. There are a number of
advantages of institutional arbitration over ad hoc arbitration in India, some of which are
discussed below:
◦ • In ad hoc arbitration, the procedures have to be agreed upon by the parties and the
arbitrator. This requires co-operation between the parties and involves a lot of time.
When a dispute is in existence, it is difficult to expect cooperation among the parties. In
institutional arbitration, on the other hand, the procedural rules are already established
by the institution. Formulating rules is therefore no cause for concern. The fees are also
fixed and regulated under rules of the institution.
◦ In ad hoc arbitration, infrastructure facilities for conducting arbitration pose a problem
and parties are often compelled to resort to hiring facilities of expensive hotels, which
increase the cost of arbitration. Other problems include getting trained staff and library
facilities for ready reference. In contrast, in institutional arbitration, the institution will
have ready facilities to conduct arbitration, trained secretarial/administrative staff, as
well as library facilities. There will be professionalism in conducting arbitration.
◦ In institutional arbitration, the arbitral institutions maintain a panel of arbitrators along
with their profile. The parties can choose the arbitrators from the panel. Such arbitral
institutions also provide for specialized arbitrators. These advantages are not available
to the parties in ad hoc arbitration.
◦ • In institutional arbitration, many arbitral institutions such as the International
Chamber of Commerce (ICC) have an experienced committee to scrutinize the arbitral
awards. Before the award is finalized and given to the parties, the experienced panel
scrutinizes it. As a result, the possibilities of the court setting aside the award is
minimal, because the scrutiny removes possible legal or technical flaws and defects in
the award.
◦ In institutional arbitration, the arbitrators are governed by the rules of the institution,
and they may be removed from the panel for not conducting the arbitration properly. In
ad hoc arbitration, the arbitrators are not subject to such institutional removal
sanctions.
◦ • In the event the arbitrator the arbitrator becomes incapable of continuing as
arbitrator in an institutional arbitration, substitutes can be easily located and the
procedure for arbitration remains the same. This advantage is not available in an ad hoc
arbitration, where one party (whose nominee arbitrator is incapacitated) has to re-
appoint the new arbitrator. This requires co-operation of the parties and can be time
consuming
◦ In institutional arbitration, as the secretarial and administrative staffs are subject to
the discipline of the institution, it is easy to maintain confidentiality of the
proceedings. In ad hoc arbitration, it is difficult to expect professionalism from the
secretarial staff.
◦ General principles of arbitration
• Arbitration is Consensual: Arbitration is a mutual process that requires the consent
of both parties. Arbitration can only be initiated, if parties have agreed to initiate it.
Parties can insert any arbitration clause if it is relevant utilizing a submission
agreement between parties. The parties are also not allowed to unilaterally withdraw
from the arbitration.
• Arbitration is Neutral: Arbitration is a neutral process hence it provides equal
opportunity to the parties such as; Arbitrator, Arbitration Panel, applicable law,
language, and venue of the arbitration. This also ensures that no parties should enjoy
the home-court advantage.
• Arbitration is a confidential procedure: The arbitration rule specifically protects
the confidentiality of the matter. The arbitration process provides privacy and restricts
unnecessary controversies regarding the case and parties. Any disclosure made during
the procedure may result in decisions and awards. In some circumstances, the parties
are allowed to restrict the access of trade secrets and other confidential information
submitted to the arbitration tribunal.
• The parties choose the arbitrator: Each party has the right to choose their
arbitrator to whom they think will fit to handle their case. If the parties have chosen a
three-member arbitration tribunal, then each party appoints one of the arbitrators.
Then the two selected arbitration shall agree on the presiding arbitrator. The center can
also suggest the potential arbitrator with relevant expertise or may directly appoint
members of the arbitration tribunal.
• The decision of the arbitral tribunal is final and easy to enforce: The decision of
the arbitral tribunal is final and known as Award. The decision of the arbitration tribunal
must be final and binding on both parties. Arbitration awards can be easily enforced in
other nations than court proceedings.
◦ Objectives and important provisions of the Act – The Arbitration and
Conciliation Act 1996
◦ The 1996 Act, which repealed the 1940 Act, was enacted to provide an effective and
expeditious dispute resolution framework, which would inspire confidence in the Indian
dispute resolution system, attract foreign investments and reassure international
investors in the reliability of the Indian legal system to provide an expeditious dispute
resolution mechanism.
◦ The 1996 Act has two significant parts – Part I provides for any arbitration conducted in
India and enforcement of awards there under.
◦ Part II provides for enforcement of foreign awards. Any arbitration conducted in India or
enforcement of award there under (whether domestic or international) is governed by Part
I, while enforcement of any foreign award to which the New York Convention or the
Geneva Convention applies, is governed by Part II of the 1996 Act. The 1996 Act contains
two unusual features that differed from the UNCITRAL Model Law.
◦ First, while the UNICITRAL Model Law was designed to apply only to international
commercial arbitrations, the 1996 Act applies both to international and domestic
arbitrations. Second, the 1996 Act goes beyond the UNICITRAL Model Law in the area of
minimizing judicial intervention
◦ The Act provides for –
◦ 1) Appointment of Arbitrators (sec 11).
◦ 2) Grounds for Challenge of appointment of Arbitrators (sec 12)
◦ 3) Arbitral Awards (sec 31)
◦ 4) Grounds of challenging Arbitral award (sec 34)

◦ CIVIL PROCEDURE CODE AND ADR

◦ Section 89 of the Code of Civil Procedure, 1908 which was introduced by the Act of 1999
and came into effect from 01/07/2002, embodies the legislative mandate to the court to
refer civil disputes to various ADR mechanisms mentioned in the Section where it finds it
appropriate to do so.

The general principle behind all the matters is to reach a settlement that is to get justice,
then why not opt for ways which can be settled amicably and efficiently by means of
compromise.
1.Settlement of disputes outside the Court: Where it appears to the Court that there exist
elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms
of settlement and give them to the parties for their observations and after receiving the observations
of the parties, the Court may re-formulate the terms of a possible settlement and refer the same for:

1. arbitration;
2. conciliation;
3. judicial settlement including settlement through Lok Adalat; or
4. mediation.

2.Where a dispute has been referred:

1. for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall
apply as if the proceedings for arbitration or conciliation were referred for settlement under the provisions of
that Act;
2. to Lok Adalat, the Court shall refer the same to the Lok Adalat in accordance with the provisions of sub-
Section (1) of Section 20 of the Legal Services Authority Act, 1987 (39 of 1987) and all other provisions of that
Act shall apply in respect of the dispute so referred to the Lok Adalat;
3. for judicial settlement, the Court shall refer the same to a suitable institution or person and such institution or
person shall be deemed to be a Lok Adalat and all the provisions of the Legal Services Authority Act, 1987 (39
of 1987) shall apply as if the dispute were referred to a Lok Adalat under the provisions of that Act;
4. for mediation, the Court shall effect a compromise between the parties and shall follow such procedure as
may be prescribed.
◦ A bare reading of the section gives a clear view that there needs to exist particular
elements only then the dispute can be referred to alternative resolutions which tells us
that not all matters are subject to ADR as mentioned before. The code also does not
depend upon any single method of ADR and lists down 4 different methods namely
Arbitration, Conciliation, both of them are subject to Arbitration and Conciliation Act,
1996, judicial settlement including settlement through Lok Adalat which is subject to
provisions of sub-Section (1) of Section 20 of the Legal Services Authority Act, 1987,
Mediation which is subject to the procedure that may be prescribed.

The powers conferred to the court is evidently vast as it allows it to surpass the decision
of the parties but the words 'there exist elements of a settlement which may be
acceptable to the parties' caste a responsibility on the court where it requires it to be
lenient towards exercising of the power and should refer the parties to ADR only when
the parties are on the same page and are ready for a settlement that is out of court.