B.A. LL. B (HONS.

)/SEMESTER –V, JULY –NOVEMBER

2018
ALTERNATIVE DISPUTE RESOLUTION

ADR: AN OPPORTUNITY TO BROADEN THE SHADOW OF THE LAW

Submitted by:

Ashutosh Misra

BA LLB (Third Year)

A042

Submitted To:

Ms. Jharna Sahijwani

Asst. Professor (Code of Civil Procedure)

School of Law, NMIMS (Deemed to be University)

RESEARCH OBJECTIVE

The research will enable the researcher to get in-depth knowledge of how ADR is evolving and
its current use in the society and how it will be more prevalent in the coming future.

RESEARCH METHODOLOGY

The research methodology adopted for the purpose of this project is the doctrinal method of
research. The various library and Internet facilities available have been utilized for this purpose.

HYPOTHESIS

ADR is more efficient in the resolution of cases than the Court system.

INTRODUCTION

Gandhiji said: "I had learnt the true practice of law. I had learnt to find out the better side of
human nature, and to enter men's hearts. I realized that the true function of a lawyer was to unite
parties given as under. The lesson was so indelibly burnt unto me that the large part of my time,
during the twenty years of my practice as a lawyer, was occupied in bringing about private
compromises of hundreds of cases. I lost nothing, thereby not even money, certainly not my
soul.1

Like any other codes and acts of India which have their own legacy and reforms, Arbitration also
has its existence which emerged long way back and carry a legacy by its amendments and
reforms. It all started in the year 1899 when first Indian Arbitration act, 1899 came into force
which was based on the British Arbitration act, 1889. This was the time when British had already
spread its wings in India so it was kind of obvious that the acts made on that time period were
literally based on the British legislation and also the first law commission of India was
established in 1834 by the Charter act of 1833. This relation is pointed out to show that British
Raj did give us something, maybe it was for their personal gain, but today we are following the
legacy in the field of Law which was made out in era of British. Arbitration act which was
formed in 1899 was only applicable to the presidency towns, i.e. Madras, Calcutta and Bombay.

1
Ebc-india.com. (2018). Eastern Book Company - Practical Lawyer. [online] Available at: http://www.ebc-
india.com/lawyer/articles/2002v1a3.htm [Accessed 5 Sep. 2018].
On the other hand, Civil Procedure Code was formed in 1859. Suits relating to arbitration were
dealt with under sections 312 to 325 while sections 326 and 327 were provided for arbitration
without court intervention. Later this act of 1859 was repealed by the Code of Civil Procedure
1877 and again revised in 1882 by the Code of Civil Procedure 1882. The provisions relating to
arbitration were mutatis mutandis reproduced in sections 506 to 526 of the new acts. 2 When
these two major laws were made it was expected that displeasure and confusion must adjoin.
And it happened, Code of Civil procedure 1882 was repealed by Code of Civil procedure 1908
where provisions relating to arbitration were included in the second schedule of the code. The
research paper would involve how ADR is evolving and is an opportunity in broadening the
shadow of the law.

OVERVIEW OF ADR

Alternative dispute resolution encompasses a range of means to resolve conflicts short of formal
litigation. The modern ADR movement originated in the United States in the 1970s, spurred by a
desire to avoid the cost, delay, and adversarial nature of litigation. For these and other reasons,
court reformers are seeking to foster its use in developing nations. The interest in ADR in some
countries also stems from a desire to revive and reform traditional mediation mechanisms. ADR
today falls into two broad categories: court-annexed options and community-based dispute
resolution mechanisms. Court-annexed ADR includes mediation/conciliation—the classic
method where a neutral third party assists disputants in reaching a mutually acceptable
solution—as well as variations of early neutral evaluation, a summary jury trial, a mini-trial, and
other techniques. Supporters argue that such methods decrease the cost and time of litigation,
improving access to justice and reducing court backlog, while at the same time preserving
important social relationships for disputants. Community-based ADR is often designed to be
independent of a formal court system that may be biased, expensive, distant, or otherwise
inaccessible to a population. New initiatives sometimes build on traditional models of popular
justice that relied on elders, religious leaders, or other community figures to help resolve
conflict. India embraced lok adalat village-level people’s courts in the 1980s, where trained
2
http://shodhganga.inf1ibnet.ac.in/bitstream/10603/37584/8/08 chapter%202.pdf
mediators sought to resolve common problems that in an earlier period may have gone to the
panchayat, a council of village or caste elders. Elsewhere in the region, bilateral donors have
recently supported village-based shalish mediation in Bangladesh and nationally established
mediation boards in Sri Lanka. In Latin America, there has been a revival of interest in the juece
de paz, a legal officer with the power to conciliate or mediate small claims. Some definitions of
ADR also include commercial arbitration: private adversarial proceedings in which a neutral
third party issues a binding decision. Private arbitration services and centers have an established
role in the United States for commercial dispute resolution, and are spreading internationally as
business, and the demand for harmonization, expands. In the last decade, more countries have
passed legislation based on the 1985 UNCITRAL Model Law on International Commercial
Arbitration, which makes an arbitral award legally binding and grants broad rights to commercial
parties choosing arbitration. It is important to distinguish between binding and non-binding
forms of ADR. Negotiation, mediation and conciliation are non-binding forms, and depend on
the willingness of parties to reach a voluntary agreement. Arbitration programs may be binding
or non-binding. Binding Arbitration produces a third party decision that the disputants must
follow even if they disagree with the result much like a judicial decision. Non-binding
Arbitration produces a third party decision that the parties may reject.

Some judicial systems require the parties to negotiate, conciliate, mediate or arbitrate, prior to
court action. ADR processes may also be required as part of prior contractual agreement between
parties. In voluntary processes, submission of a dispute to an ADR process depends entirely on
the will of the parties. These forms of ADR along with a lot of other hybrid processes are
discussed in the next chapter of the paper. Therefore, it can observed that the term “Alternative
dispute resolution” can refer to everything from facilitated settlement negotiations in which
disputants are encouraged to negotiate directly with each other, prior to some other legal process,
to arbitration systems or mini-trials that look and feel very much like a courtroom process.
Processes designed to manage community tension or facilitate community development issues
can also be included into the rubric of ADR.
ELABORATE EXPLANATION OF THE VARIOUS KINDS OF ADR MECHANISMS

a) Arbitration: Arbitration, in the law, is a form of alternative dispute resolution — specifically,

a legal alternative to litigation whereby the parties to a dispute agree to submit their respective
positions (through agreement or hearing) to a neutral third party (the arbitrator(s) or arbiter(s))
for resolution. 5 Species of arbitration i) Commercial arbitration:Agreements to arbitrate were
not enforceable at common law, though an arbitrator's judgment was usually enforceable (once
the parties had already submitted the case to him or her). During the Industrial Revolution, this
situation became intolerable for large corporations. They argued that too many valuable business
relationships were being destroyed through years of expensive adversarial litigation, in courts
whose strange rules differed significantly from the informal norms and conventions of business
people (the private law of commerce, or jus merchant).

ii) Other forms of Contract Arbitration: Arbitration can be carried out between private
individuals, between states, or between states and private individuals. In the case of arbitration
between states, or between states and individuals, the Permanent Court of Arbitration and the
International Center for the Settlement of Investment 5 http://en.wikipedia.org/wiki/Arbitration 6
Ibid 11 Disputes (ICSID) are the predominant organizations. Arbitration is also used as part of
the dispute settlement process under the WTO Dispute Settlement Understanding. International
arbitral bodies for cases between private persons also exist, the International Chamber of
Commerce Court of Arbitration being the most important. The American Arbitration Association
is a popular arbitral body in the United States. Arbitration also exists in international sport
through the Court of Arbitration for Sport.

Judicial Arbitration: Some state court systems have promulged court-ordered arbitration;
family law (particularly child custody) is the most prominent example. Judicial arbitration is
often merely advisory, serving as the first step toward resolution, but not binding either side and
allowing for trial de novo. v) Proceedings: Various bodies of rules have been developed that can
be used for arbitration proceedings. The two of the most important are the UNCITRAL rules and
the ICSID rules. The general rules to be followed by the arbitrator are specified by the agreement
establishing the arbitration. Some jurisdictions have instituted a limited grace period during
which an arbitral decision may be appealed against, but after which there can be no appeal. In the
case of arbitration under international law, a right of appeal does not in general exist, although
one may be provided for by the arbitration agreement, provided a court exists capable of hearing
the appeal.

b) Mediation: Mediation is a process of alternative dispute resolution in which a neutral third

party, the mediator, assists two or more parties in order to help them negotiate an agreement,
with concrete effects, on a matter of common interest; lato sensu is any activity in which an
agreement on whatever matter is researched by an impartial third party, usually a professional, in
the common interest of the parties.

The typical mediation has no formal compulsory elements, although some common elements are
usually found: • Each party having a chance to tell his or her story; • Identification of issues,
usually by the mediator; • The clarification and detailed specification of the respective interests
and objectives, • the conversion of respective subjective evaluations into more objective values, •
Identification of options; • Discussion and analysis of the possible effects of various solutions; •
the adjustment and the refining of the accessory aspects, • memorializing the agreements into a
written draft.

c) Conciliation: Conciliation is an alternative dispute resolution process whereby the parties to a

dispute (including future interest disputes) agree to utilize the services of a conciliator, who then
meets with the parties separately in an attempt to resolve their differences. Conciliation differs
from arbitration in that the conciliation process, in and of itself, has no legal standing, and the
conciliator usually has no authority to seek evidence or call witnesses, usually writes no decision,
and makes no award. Conciliation differs from mediation in that the main goal is to conciliate,
most of the time by seeking concessions. In mediation, the mediator tries to guide the discussion
in a way that optimizes parties needs, takes feelings into account and reframes representations. In
conciliation the parties seldom, if ever, actually face each other across the table in the presence
of the conciliator. (This latter difference can be regarded as one of species to genus. Most
practicing mediators refer to the practice of meeting with the parties separately as "caucusing"
and would regard conciliation as a specific type or form of mediation practice -- "shuttle
diplomacy" -- that relies on exclusively on caucusing. All the other features of conciliation are
found in mediation as well.

d) Negotiation: Negotiation is the process whereby interested parties resolve disputes, agree
upon courses of action, bargain for individual or collective advantage, and/or attempt to craft
outcomes which serve their mutual interests. It is usually regarded as a form of alternative
dispute resolution.Given this definition, one can see negotiation occurring in almost all walks of
life, from parenting to the courtroom.13 In the advocacy approach, a skilled negotiator usually
serves as advocate for one party to the negotiation and attempts to obtain the most favorable
outcomes possible for that party. In this process the negotiator attempts to determine the
minimum outcome(s) the other party is (or parties are) willing to accept, then adjusts her
demands accordingly. A "successful" negotiation in the advocacy approach is when the
negotiator is able to obtain all or most of the outcomes his party desires, but without driving the
other party to permanently break off negotiations. Traditional negotiating is sometimes called
win-lose because of the hard-ball style of the negotiators whose motive is to get as much as they
can for their side

LANDMARK AWARDS GIVEN IN ADR

In the case of Union of lndia and Ors. Vs. Aradhna Trading co. and Ors3, the court made out
that Section 41 of the Arbitration Act shall have all other related powers of the ordinary civil
court subject to the constraints contained in the special Act itself. Normally, an appeal would be
maintainable but there are two constrains as provided under the Special Act, namely - it should
not be a second appeal as provided under sub-section (2) of Section 39 of the Act and another
constraint as provided under sub-section (1) of Section 39 of the Arbitration Act and it is
emphatic too when it says that appeal shall lie against the orders indicated in the provision and
from no other order. Section 41 of the Arbitration Act makes the provisions of CPC applicable
subject to the provisions of the Arbitration Act and the rules framed thereunder. Therefore, the
nature of an order against which an appeal may lie must conform to the nature of the order as
enumerated under sub-section (1) of Section 39 of the Arbitration Act. If it does not amount to
such an order as enumerated under sub-section (1) of Section 39, the prohibition as contained in
this sub-section "(against no other order”) itself, would become operative, subject to which alone
provisions of CPC apply under Section 41 of the Act. This clearly shows that in order for the
maintainability of CPC under section 41 of Arbitration act, provisions under section 39 should be
kept in mind.

3
AIR 2002 SC 1626
In 2002, a three judge bench in Bhatia International set the precedent that Part I shall apply to
Part II of the Act. As a result, all the later decisions in various cases followed the suit. This
created a lot of ruckus as almost all the foreign awards were tried and tested in the national
courts as if they were domestic awards. In many situations, foreign awards were not only refused
enforcement according to Part II of the Act but were also set aside, something which is only
possible to the domestic awards under Part I. This kind of treatment made the foreign awards
susceptible to death by long drawn legal battles in Indian courts.

Seeing the situation getting worse with many matters reaching the Supreme Court, this
Constitutional Bench was set up (Reported here). Better late than never, though it took a massive
decade, the judgment is nevertheless a welcome decision. The Supreme Court has clearly
decided that Part I and part II are mutually exclusive and no portion of Part I shall be applicable
to Part II. Rejecting the argument of the appellant that the 1996 Act provides for delocalised
arbitration, the court found that India has adopted the territorial principle, thereby limiting the
applicability of Part I to arbitrations which take place in India.

“We are of the considered opinion that Part I of the Arbitration Act, 1996 would have no
application to International Commercial Arbitration held outside India. Therefore, such awards
would only be subject to the jurisdiction of the Indian courts when the same are sought to be
enforced in India in accordance with the provisions contained in Part II of the Arbitration Act,
1996.” This, of course means that foreign awards will not be subject to provisions of Part I. This
eventually means that the court intervention would significantly reduce and foreign awards
would no longer be at the mercy of Section 34 of Part I which carries enormous power of setting
aside an award. Further, the Supreme Court has also stated that a foreign award could only be set
aside where the award was made and only in a rare circumstance where this is not possible, it
could be set aside under the law of the country governing arbitration agreement which the award
was made.

In arriving at this decision, the Supreme Court has done a commendable job by minutely going
into the 1996 Act and clarifying the relevant provisions keeping in view the international
standards and most importantly the objects and reasons of the Act itself. While arriving at its
decision, the court has discussed the founding concepts of international arbitration putting them
in sync with the 1996 Act in a very skillful manner, as if there never was any sort of confusion in
the Act.4

In Sanshin Chemical Industry v. Oriental Carbons & chemical Ltd., there arose a dispute
between the parties regarding the decision of the Joint Arbitration Committee relating to venue
of arbitration. The Apex Court held that a decision on the question of venue will not be either an
award or an interim award so as to be appealable under Section 34 of the act.

In Brijendra Nath v. Mayank, the court held that where the parties have acted upon the arbitral
award during the pendency of the application challenging its validity, it would amount to
estoppel against attacking the award.

An award which is set aside is no longer remains enforceable by law. The parties are restored to
their former position as to their claims in the dispute. Setting aside an award means that it is
rejected as invalid. The award is avoided and the matter becomes open for decision again. The
parties become free to go back to arbitration or to have the matter decided through court.

CONCLUSION

India has a long history of settlement of disputes outside the formal justice delivery system. The
concept of parties settling their disputes by reference to a person or persons of their choice or
private tribunals was well known to ancient India. Long before the king came to adjudicate on
disputes between persons such disputes were quite peacefully decided by the intervention of the
kulas, srenis, pugas and such other autonomous bodies.5 These traditional institutions worked as
main means of dispute resolution, not an alternative. During the British rule the system of
dispute resolution was changed and a new formal, adversary system of dispute resolution
originated. Arbitration was recognised as out of court method of dispute resolution and several

4
Mediate.com. (2018). Indian Supreme Court's Landmark Judgement on Arbitration: An Insight. [online] Available
at: https://www.mediate.com/articles/ArbitriLexbl20121002.cfm [Accessed 6 Sep. 2018].
5
P.C. Rao, Alternatives to Litigation in India, in P.C. Rao and William Sheffield (eds.), Alternative Dispute
Resolution: What it is and How it Works, Universal Law Publishing Co., New Delhi, (1997) p. 27.
provisions were enacted relating to that. The ADR system as is understood in the present
scenario is the result of the shortcomings of that formal judicial system. Now the alternative
disputes resolution techniques are being used to avoid the costs, delays and cumbersome
procedure of the formal courts. 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. There is an
urgent need for justice dispensation through ADR mechanisms.6 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. The researcher after analysing is of the view that ADR is more efficient in
speedy trial of the cases and will help the Court’s in eliminating the backlog of cases till some
extent.

6
Government of India, Law Commission of India, 222 nd report, ’Need for Justice-dispensation through ADR etc.’,
at ¶ 1.69.