Scroll Top

ALTERNATIVE DISPUTE RESOLUTION MECHANISM IN INDIAN LAW 

Introduction:

It is a universal concept that everyone should be able to acquire justice efficiently and at a reasonable cost. “Any quarrel is cancerous.” The sooner it is resolved, the better for all individuals involved, as well as society as a whole. If it is not addressed at the earliest available moment, it will evolve at a rapid rate over time, and the effort necessary to settle it will grow massively as new concerns and competing circumstances arise. Another conflict arises as a result of the first. As a result, it is critical to address the conflict as soon as it arises[1].” ‘There are two main approaches to resolve a conflict that may emerge in modern society’s day-to-day living. Either take your case to a court of law or use an alternative dispute resolution (ADR) method, which can come from different sources. Arbitration, Conciliation, Mediation, settlement through Look Adalat and with the intervention of the Family Court, Judicial Settlement, Plea Bargaining, and Collective Bargaining, etc. are all ADR mechanisms for resolving any conflict.

Since the mechanism of arbitration, titled differently, was in existence in this country even before the advent of codified laws, India has been an arbitration-friendly country from the beginning. The heads of communities and the elders of families used to act as arbitrators in the pre-court (in the modern sense) period, and people accepted the judgments of those arbitrators. Depending on the conditions and contractual relationship between the parties, the ADR process may be binding or non-binding, voluntary or mandatory. This method is not new in India; what is new is its ubiquitous use in recent times. There is a strong preference for the merits of methods such as arbitration, mediation, and conciliation under India’s current socioeconomic situations.

Enactment of Arbitration and Conciliation Act, 1996

In 1996, the Indian legislature agreed that, to relieve the burden on the courts, a more efficient justice delivery system should be established in the form of arbitration, mediation, and conciliation as Alternative Dispute Resolution (ADR) options in appropriate civil and commercial matters. As a consequence, the Arbitration and Conciliation Act, 1996 was introduced by Parliament to expedite the resolution of economic disputes through private arbitration. The timely resolution of issues is regarded as a fundamental concern for the proper operation of any commercial industry. ADR was originally known as Alternative Dispute Resolution, but has now been renamed Appropriate Dispute Resolution in many areas due to its procedures and well-received outcomes. Similarly, Judicial Dispute Resolution or JDR is another term for litigation. Because ADR is not constrained by jurisdictional boundaries, it is regarded as a massive network[2].

The Arbitration and Conciliation Act of 1996 was passed mainly to implement the United Nations Commission on International Trade Law’s Model Law on International Commercial Arbitration and to create an arbitration-friendly legal framework in India.[3] This Act’s essential thought was that courts should intervene as little as possible. Arbitration and conciliation were created to be a fast, efficient, and cost-effective way of settling disagreements. The ADR movement’s purpose is to prevent vexation, expenditure, and delay while also advancing the principle of equal access to justice. As a result, the idea of judicial non-interference was a driving force behind the 1996 Arbitration and Conciliation Act’s passage.

Prior to 1996, the Act of 1940 controlled the country’s arbitration law. This Act was partly founded on distrust of the arbitral procedure, and it gave plaintiffs multiple options to seek court involvement. This, paired with a sluggish legal system, caused delays, making arbitrations ineffective and unpleasant. In a 1981 Supreme Court decision, the Court (Hon’ble Justice Desai) commented, “the method in which the processes under the (1940) Act is handled and without exception challenged in Courts has made attorneys laugh and legal philosophers weep.”

The Scope of Judicial Intervention under Act of 1996:

Parties that do not intend to impose an arbitral judgment that is detrimental to their interests frequently abuse Section 34 of the Arbitration and Conciliation Act of 1996[4], which offers limited procedural grounds for setting aside arbitral awards. An appeal against the court’s original decrees made under section 34 is allowed under section 37[5]. Although the grounds in Section 34 are strictly administrative, the parties commonly encounter up debating the merits of the dispute at a Section 34 hearing. Original decrees issued by a Court awarding or voluntarily relinquished an interim measure under sections 9[6] or 17[7] of the Act are likewise appealable under section 37. This can be fairly stated that these appeals result in unnecessary judicial intervention in the arbitral process, which is meant to settle disputes promptly and speedily following in the footsteps of the 1996 Act, and that the scope of appeals should be reduced. Arbitral processes, on the other hand, cannot work without judicial checks and balances.

THE ROLE OF THE COURTS

The primary goal of Alternative Dispute Resolution (ADR) procedures, the most well-known of which is mediation, is to avoid filing a lawsuit. In any case, judicial action is unavoidable. Interference is sometimes enticing in order to keep the arbitration process from being diverted to a distant location. Interference by courts is extremely important, and this can be seen all across the world. In most countries, subordinate courts have the authority to investigate arbitration cases, and as a result, a variety of issues reach the Supreme Court. In India, a similar framework is followed, and a large number of mediation cases have been reported in lower courts. Arbitration is a consequence of the parties’ previous behaviour under a contract. As a result, in every arbitration, the parties’ major interests must be considered. This autonomy, however, is not unrestricted. This sovereignty of the parties in the arbitration is limited by the relevant law and transparent approach. The independence of parties is further hampered by the principles of arbitral institutions. In addition, courts appear to be required to intervene in cases of arbitrator bias, procedure violations, and so on. Courts also get involved when it comes to setting aside or enforcing an award. In an arbitration, complete flexibility for parties to do anything they want is insufficient, and the common outcome is that total non-obstruction by courts is undesirable. In the Hooters case[8], for illustration, the court refused to uphold the arbitration clause, stating

“The parties decided to submit their claims to arbitration, which is a procedure for resolving conflicts fairly by a neutral third party. Hooters took on the responsibility of building such a system as part of a contract. Hooters completely failed to fulfil its contractual obligation by constructing a fake procedure unworthy of even the term of arbitration.”

As a result, court intervention in arbitrations is both desired and necessary, and it should not be avoided, no matter how harsh the critics are

THE ARBITRATION AND CONCILIATION (AMENDMENT) ACT OF 2019: A WAY FORWARD

The 2019 Amendment introduces Part 1A to the Act, entitled “Arbitration Council of India” (Sections 43A to 43M)[9], allowing the Central Government to create the ACI through an official gazette notification (Section 43B).

The ACI will be formed of:

  1. As its Chairperson, the Central Government, in coordination with the Chief Justice of India, appoints a retired Supreme Court or High Court judge.
  2. As the Central Government Member, a prominent arbitrator has been nominated.
  3. As Chairperson-Member, the Central Government, in conjunction with the Chairperson, appoints a prominent academician with research and teaching experience in the field of arbitration.
  4. Secretary to the Central Government in the Ministry of Law and Justice’s Department of Legal Affairs
  5. Both as ex officio members are the Secretary to the Central Government in the Department of Expenditure, Ministry of Finance.
  6. As a part-time member, one representative of a recognized body of commerce and industry, chosen by the Central Government on a rotational basis.
  7. Ex officio: Chief Executive Officer-Member-Secretary (Section 43C(1)(a)–(f)).

The ACI is responsible for assessing arbitral institutions based on criteria such as infrastructure, arbitrator quality and caliber, performance, and adherence to time restrictions for the resolution of domestic and international commercial arbitrations (Section 43I).

ARBITRATOR’S QUALIFICATIONS

Section 43D(2)(c) entrusts the ACI with the responsibility of examining arbitrator grade. The qualifications, experience, and standards for arbitrator accreditation shall be as outlined in the Eighth Schedule, as amended by the 2019 Amendment (Section43J). Only nine groups of people are qualified to be arbitrators, according to the Eighth Schedule (such as an Indian advocate, cost accountant, or company secretary with a specific amount of experience, or a government official in certain instances, for example).

As a result, the 2019 Amendment disqualifies any foreign scholar, foreign-registered lawyer, or retired foreign officer from serving as an arbitrator. For obvious reasons, foreign parties will be deterred from using Indian institutional arbitration, where their options for potential arbitrators are limited by nationality, the likelihood of a lack of expertise, and specialization – both academic and professional – in international arbitration.

CONCLUSION

As previously stated, there are numerous legal, socioeconomic, and legal issues with India’s ADR mechanism. These issues come as a result of India’s diverse and culturally rich people, as well as a lack of political engagement in this domain. To overcome these obstacles, the government must act decisively and, first and foremost, accept the 176th Law Commission’s Report. Along with this, governments at both the state and federal levels must develop public awareness programs aimed not only at individuals but also at arbitrators. ADR is a whole new concept, and concepts like these take time to implement at the grassroots level. Acceptance of such a concept is also a major issue. As a result, a robust program providing legal literacy to the Indian people, particularly in the field of ADR, becomes essential. This would not only bring ADR to the general public, but it will also allow an informed citizen to contribute to the creation of such legislation in India. The general public is equally responsible for this blunder in the ADR system. People should choose ADR over litigation and use it wisely in order to obtain quick and cost-effective justice. The goal that ADR was designed to accomplish. To reduce the strain on the courts, these mechanisms should also be employed in dealing with private disputes.

Author(s) Name: Abhishek Chadha (Guru Gobind Singh Indraprastha University, Delhi)

References:

[1]Anurag A Agrawal, ‘Strengthening ‘Lok Adalat’ Movement in India’, AIR Journal, vol.1, (March 2006, p. 33).

[2] ‘Compulsory Mediation’, Paul Randolph <http://arbitrationindia.org/pdf/tia_4_2.pdf> accessed on March 13,

2022.

[3] < https://www.indiacode.nic.in/bitstream/123456789/1978/1/AAA1996__26.pdf > accessed on March 23, 2022

[4] < https://indiankanoon.org/doc/536284/ > accessed on March 23,2022

[5] < https://indiankanoon.org/doc/772406/ > accessed on March 23, 2022

[6] < https://indiankanoon.org/doc/1079220/ > accessed on March 23, 2022

[7]https://indiankanoon.org/doc/318136/#:~:text=Section%2017%20in%20THE%20ARBITRATION%20AND%20CONCILIATION%20ACT%2C%201996&text=(1)%20Unless%20otherwise%20agreed%20by,subject%2Dmatter%20of%20the%20dispute.  Accessed on March 23, 2022

[8]Hooters of America v. Phillips, Court of Appeals, (1999) US, CA-96-3360-4-22.

[9] < https://egazette.nic.in/WriteReadData/2019/210414.pdf > accessed on March 23, 2022