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Importance of Alternative Dispute Resolution in the entrepreneurial era.


Conflict of interest also comes into the picture with the dawn of human civilization. A conflict of interest arises when an individual or an entity does something for its interests that may be unfair, unethical, or even illegal. Conflicts or Disputes are an inevitable part of our society, but it does not mean that parties cannot resolve them. The dominant and most trusted forum where the parties litigate their disputes for resolution is the court of law, but due to the complex, time taking, expensive and stressful litigation process, and enormous workload on the judiciary made delays in justice. I think we all have heard ‘‘justice delayed is justice denied’’ a quote from W.E. Gladstone, the former Prime Minister of England. According to this quote, this is not actual justice when we cannot get justice at the right time.  Hence to get justice simply and speedily, the legislature introduced the Alternative Dispute Resolution (ADR) method for dispute resolution. Therefore, we can say that there are two main forums for the resolution of conflicts, one is the court of law, and the second is Alternative Dispute Resolution (ADR). We all should know what is ADR, what is the process of getting justice through ADR, what are the governing laws, Why Alternative Dispute Resolution (ADR) methods are important for entrepreneurs, and what are the advantages and advantages, and disadvantages of ADR. All these things have been discussed in this article so that parties can become aware and can get real justice.

What is Alternative Dispute Resolution (ADR)?

The general meaning of Alternative Dispute Resolution settlement of a dispute out of the court. Interestingly, ADR is not a new concept for our country. In ancient times, some family, society, and minor disputes related to trade and property were resolved with the mediation of elder and experienced people in society. The decision given by elders and experienced people is treated as the decision of God by all. At that time maximums disputes had been resolved at the village forum, and hardly any disputes came before the court. But political and social changes reduce dominating status and trust of this dispute resolution system and the court of law became the dominant and most trusted forum for dispute resolution.

After some time, it is realized that due to the complex litigation process and workload on the court of law justice cannot be delivered at right time hence legislature introduced Sec 89 in the Code of Civil Procedure,1908 with the object of reducing the workload from the court and delivering justice in a simple, speedy manner. Referring to Section 89 of CPC, legislation created another approach called Alternative Dispute Resolution. In the Alternative Dispute Resolution system parties can choose the venue, schedule, and arbitrator according to their convenience to resolve their disputes. This system is informal, flexible, and not a lengthy process as litigation. For dispute resolution, this system follows a negotiation approach.

The term Alternative Dispute Resolution includes Arbitration, Conciliation, Mediation, and Judicial settlement including settlement through Lok Adalat mechanisms for dispute resolution:

  1. Arbitration: The modern arbitration act in India was introduced by Bengal Regulations. Arbitration is a process of quasi-judicial nature in which conflicts are submitted with written agreement by the parties. In the arbitration process, parties can decide the venue and the schedule according to their convenience. The arbitrator (s) appointed by the court or by parties but the number of arbitrators should be odd. The procedure and the decision shall be governed by the Arbitration and Conciliation Act, of 1996. The arbitration award is binding on the parties and can be challenged only if the procedure is not followed according to the act.
  2. Conciliation: Conciliation proceedings are non-judicial in nature in which dispute resolution may initiate without any prior agreement by the parties with the assistance of a conciliator. According to Section 70 of the Arbitration and Conciliation Act, of 1996 the conciliator shall not disclose any factual information to another party, confidentiality is the essence of conciliation. The settlement agreement of the conflicts shall be authenticated by the conciliator. According to Section 74 of the Arbitration and Conciliation Act, of 1996 the settlement agreement is considered a decree of the court. This decree/order cannot be appealed.
  3. Mediation: In Mediation, process participants voluntarily in resolving disputes with a mutually selected impartial person who helps them settle their disputes. The procedures are not controlled by any statutory provisions; therefore, this process is more flexible than other alternative dispute resolution mechanisms. At this forum, a settlement agreement depends on the parties, but an order /decree from the settlement will be final and cannot be appealed.
  4. Lok Adalat: Lok Adalat is a forum that generally dealt with cases related to motor accident claims, compoundable criminal offenses, family disputes, land acquisition, and mutation disputes, and disputes which are not sub-judice that are pending or pre-litigation stage in the court of law. In Lok Adalat, disputes are settled through a negotiation approach. Under Legal Service Authorities 1987, this forum obtains statutory status, and decisions/award made by Lok Adalat is deemed to be a decree of the civil court. This award is binding on all the parties and cannot be appealable.
What is the referral process to different ADR modes under section 89 of CPC, 1908?

Section 89 of CPC, 1908 provides the provision related to the referral of disputes to Alternative Dispute Resolution mechanisms for resolution. Through the following case, we discuss procedures guidelines, and categories of cases that can be resolved at the ADR forum:

In the Afcons Infrastructure Ltd. V Cherian Varkey Construction Co. case the Supreme Court categorizes the cases that are suitable for the ADR methods, some important categories are the following:

-All the conflicts relating to trade, commerce, and contracts made between the parties.

-All the disputes relating to family issues such as matrimonial, successor, and property division.

-conflicts related to consumers, compensation related to the motor vehicle act, or other accidents.

The Supreme Court also suggested that the procedure to be adopted by a court under Section 89 of CPC, 1908 should be as under:

  • The court should aware of the fact and nature of conflicts, and shall conduct a preliminary hearing for the appearance of the parties before framing issues.
  • The court should at first consider the category of disputes, according to that case should be referred to ADR methods. If the case nature is fit the given category a brief order should be recorded.
  • The court should ascertain the parties’ intention for arbitration. The court should inform the complete process, and cost of arbitration. Only if both parties agree to arbitration, the matter should be referred to arbitration.
  • If both parties agree to conciliation, the court should provide complete information about conciliation. Only if parties agree matter should be referred for conciliation.
  • If parties do not agree to arbitration and conciliation, the court should refer the matter to Lok Adalat, mediation, or a judicial settlement according to preferences.
  • If the reference to the ADR process fails, on receipt of the report of ADR, the court shall proceed with the hearing of the suit.
  • If any terms of the settlement are ex-facie illegal or unenforceable, the court should draw the parties’ attention to avoid further litigation and disputes about executability.
 Why Alternative Dispute Resolution (ADR) methods are important for entrepreneurs?

We are all would familiar that any business operation depends on many factors such as a powerful idea, a lot of investment, time-taking processes, and a lot of agreement with other entities. Since a business is a complex arrangement hence it is obvious that there are many conflicts arise during the business operation. If the conflict of interests could not be resolved timely then it would be an adverse effect on business. In the ADR method, there is a win-win resolution way, hence no one parries in a total loss situation. Dispute resolution through the ADR approach relationship of parties does not become worse as in the litigation process. If parties enter into an overseas business, they are not aware of local laws and different counties, in this scenario ADR process also very plays an important role, and parties easily can resolve their disputes. We have heard the quote:

Discourage litigation. Persuade your neighbours to compromise whenever you can. Point out to them how the nominal winner is often a real loser – in fees, expenses, and waste of time’’.                                                                                                           -Abraham Lincon


The alternative dispute resolution method is a private process, as the initiation of arbitration is under an agreement. It may be less adversarial, less formal, and more flexible with the adoption of simpler procedures. Arbitration does not follow any formal rules of evidence. Alternative Dispute Resolution mechanisms undoubtedly prove very advantageous for dispute resolution, but it is also important to note there are some disadvantages such as there is no guaranteed resolution of the dispute, in the conciliation and mediation process final decision is open for parties it may either accept or reject.

Author(s) Name: Arvind Kumar Yadav (Faculty of Law, University of Delhi)