Making Alternative Dispute Resolution the Primary Mode of Dispute Resolution

For many years, alternative dispute resolution (ADR) has been used to describe arbitration, conciliation and mediation as alternatives to litigation. The idea behind calling these methods of dispute resolution “alternate”, is that litigation has been, and will always be the primary mode of dispute resolution. However, in the last one decade, we have seen a paradigm shift in this approach. Young lawyers, general counsel, micro, small and medium enterprises (MSMEs) as well as companies are moving away from protracted litigation and accepting ADR as primary modes of dispute resolution. Litigation is a time-consuming and costly affair. Pursuing a case in court may result in loss of time, efforts and money whereas resolving a dispute by ADR can be quicker and cheaper. Another reason why ADR gained popularity is perhaps the dissatisfaction created by the litigation process. However, it cannot be denied that formal adjudication system will always be there as there will always be certain disputes that can only be resolved through it. Barring such disputes, all other disputes that one can resolve without burdening the court system, can be efficaciously resolved through ADR.

 

Over the last decade, ADR has gained traction in India. Both legislative framework as well as judicial precedents have aimed at promoting ADR as a preferred mode of dispute resolution rather than a mere substitute or alternative to the formal judicial system. In particular, the Arbitration and Conciliation Act, 1996 (Arbitration Act) has been amended[1] time and again with the view of keeping at par with other legal regimes and making India an arbitration-friendly jurisdiction. This has been buttressed by the Indian judiciary which has also actively adopted and recommended a minimal intervention approach, such that confidence is instilled in the arbitral process, amongst parties.

 

Particularly, with the current arbitration regime in place in India, the arbitral process is party friendly, time bound and confidential. The courts are slow in granting anti-arbitration injunctions, interfering with foreign awards, and a challenge to an arbitral award is now available to a party on limited grounds. This has allowed parties to attain a final and binding decision in a shorter timeline as against long-drawn battles before judicial fora.

 

The global business community has reaped benefits of ADR, both for containment of disputes as well as quick resolution. Across various sectors, the growing trend now, particularly in relation to commercial contracts, is to opt for an arbitration clause or med-arb clause for dispute resolution to ensure access to justice in reduced time and cost and in an efficient and satisfactory manner.

 

While the course of arbitration in India has been flourishing, mediation in India has been slowly gaining recognition. Mr Justice N.V. Ramana, the Chief Justice of India, recently said that prescribing mediation as a mandatory first step for resolution of every allowable dispute will go a long way in promoting mediation[2].

 

The primary reason for slow growth of mediation in India was the lack of awareness and its acceptance as a mode of dispute resolution. Other reasons why mediation could not gain popularity include lack of domain experts and suitable infrastructure. Recently, the Mediation Bill, 2021 (Mediation Bill) has been introduced with the aim of promoting domestic and international mediation in India, including online mediation, and is currently pending before the Rajya Sabha.

 

In April 2022, the Ministry of Law and Justice, India, indicated that the cases pending before the Supreme Court of India are 70,154, before various High Courts are 58,90,726 and 4,09,85,490 before District and Subordinate Courts, as of March 2022[3]. Further, on 15-4-2022, the Chief Justice of India while addressing the inaugural session of Telangana State Judicial Officers Conference, 2022 said that the judiciary is overburdened.[4]

 

In view of this surmounting pendency, adopting ADR as a primary mode of dispute resolution, as opposed to a mere alternative, is now the need of the hour. This will also result in decongesting the court system and bring about much-needed relief to the judiciary, which is overburdened.

 


Legislative Framework and Other Initiatives


Section 89 of the Code of Civil Procedure 1908 (CPC) was introduced in 2002 with the objective of promoting non-judicial dispute resolution. Section 89 contemplates reference of a dispute to arbitration, conciliation, judicial settlement through Lok Adalat or mediation, where there exists an element of settlement in the opinion of the court.

 

In 2018, Section 12-A was introduced in the Commercial Courts Act, 2015, mandating mediation before a party can approach a commercial court with a suit. The exception to pre-litigation mediation is cases where urgent interim relief is being sought. Thereafter, the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 were notified, which enumerate the manner in which the mediation proceedings would be conducted for reconciling and settling commercial disputes between the parties.

 

The Arbitration Act, from its inception, has endorsed a minimum interference approach. Recently, the judiciary has also strongly adopted a minimal intervention approach to encourage more parties to arbitrate. The key amendments introduced to the Arbitration Act in 2015 and 2019 are also in keeping with the objective of promoting arbitration as well the minimal interference approach, such that India can be transformed into a global hub for arbitration.

 

Before the 2015 Amendment, in relation to Section 34 proceedings, certain High Courts had the practice of allowing new evidence, documentary as well as oral, at the stage of challenge which was akin to a trial. With the amendment in 2015, this practice is now eliminated, and challenge proceedings are strictly summary in nature, requiring parties to establish a challenge based on the arbitral record filed before the Arbitral Tribunal.

 

The 2019 Amendment also provided for establishing an independent body, the Arbitration Council of India (ACI). ACI’s envisaged duties include promoting alternative dispute resolution, policy making, operation and maintenance of uniform professional standards, grading arbitral institutions and accrediting arbitrators.

 

Additionally, the real estate sector, recognising the benefits to parties of a quick and cost-effective resolution of disputes, has adopted conciliation as a mode of dispute resolution. In 2016, the Real Estate (Regulation and Development) Act, 2016 (RERA) was enacted with the aim of protecting homebuyers from unscrupulous real estate developers and to provide quick dispute resolution. RERA has established a Real Estate Regulatory Authority (Authority) in each State for regulation of the real estate sector, which also acts as an adjudicating body for dispute redressal. Section 32(g) of the RERA provides for measures to be taken by the Authority to facilitate amicable conciliation of disputes between the promoters and the allottees through dispute settlement forums comprising of representatives from consumers and promoters associations. In line with this provision, several States have set up conciliation forums.

 

The Mediation Bill seeks to set up a Mediation Council of India (MCI) to promote and regulate domestic and international mediation in India, including online mediation. The Mediation Bill contemplates pre-litigation mediation or a subsequent reference, at the request of the parties, at any stage of the proceeding before a forum. The mediation proceedings envisaged are time bound, to be completed within 180 days, which is further extendable with the consent of the parties by another 180 days. The mediation settlement agreement, being a culmination of the disputes, is envisaged to be final, binding and enforceable in the same manner as courts judgments.

 

The First Schedule of the Mediation Bill enlists the disputes or matters which are not fit for mediation. Further, the Second Schedule enumerates an extensive list of matters which cannot be subjected to mediation. In cases where the Government is a party, the reference is confined to commercial disputes. Although the provisions in the Mediation Bill suggest that these are indicative, the legislature has adopted a restrictive approach and has failed to appreciate that there is a need to make the mediation process more inclusive and that only certain categories of proceedings should be reserved for adjudication by the judicial system, as a matter of public policy. In this regard, the principles set out in the decision of the Supreme Court in Vidya Drolia v. Durga Trading Corpn.[5] on arbitrability of disputes can be a yardstick to determine whether disputes can be referred to mediation or not.

 

The advancement and adoption of technology, as well as the shift towards online dispute resolution, has resulted in popularisation of online mediation. Online mediation has the potential to revolutionise the justice-delivery system by promising simple and affordable justice for all[6]. This shift will likely depend on the legislative framework, which is ultimately adopted by India and steps taken for its enforcement.

 

In a step forward, the Law Department of the Government of Telangana has issued an order dated 17-3-2022 designating the International Arbitration and Mediation Center, Hyderabad (IAMC) as the arbitral or mediation institution (as the case may be) in cases where ministries, departments, public sector companies, or other entities controlled or managed by the Government of Telangana are a party and where the value of the dispute is more than Rs 3 crores. In relation to existing contracts where the contract value is Rs 10 crores or above, parties have been directed to consider amending the dispute resolution clause, in consultation with the other parties to the contract, to designate IAMC.

 


Recommendations


All stakeholders have a role to play to pave the way for ADR to become more seamless, time and cost-efficient, and as such, a preferred and complete system for accessing justice.

 

The non-intervention approach adopted and recommended time and again by the Supreme Court of India should be followed by High Courts as well as lower courts as a rule. In addition, an active role by courts to recognise ADR and encourage parties to mandatorily explore settlement through mediation, before litigation can proceed, could result in early resolution of cases that are fit for settlement.

 

The promptness with which arbitration-related litigation, which comes before a court, either before, during or after the conclusion of the arbitral proceedings, is disposed of by courts is also crucial to increase the efficacy of arbitration as a dispute resolution method.

 

Particularly, expeditious disposal of challenge proceedings under Section 34 of the Arbitration Act, which applies to arbitral proceedings where the legal or juridical seat of arbitration is India. Although, challenge proceedings are now summary in nature and time bound, delays are inevitable in view of an overburdened judiciary. In addition, an appeal lies from an order setting aside or refusing to set aside an arbitral award, under Section 37 of the Arbitration Act, making it a two-tier challenge. The legislature could consider doing away with a Section 37 appeal currently in place, in order to ensure that awards attain finality at the earliest and enforcement can proceed. Additionally, heavy costs should be imposed on litigants where the court finds that the challenge proceedings have simply been preferred as a delay tactic to stall the enforcement of an award.

 

The State Governments could take steps to support and promote institutional arbitration and mediation in a similar manner as the State of Telangana. Both development and promotion of institutional forums for resolution of disputes have the potential of converting India into a global hub for arbitration and mediation, like London and Singapore.

 

In addition, strengthening the pool of arbitrators and professionals conducting mediation proceedings to ensure effective dispute resolution, and in case of arbitration, to reduce the susceptibility of awards to legal challenges is also of significance.

 

Lastly, while there is recognition and public awareness amongst individuals in relation to arbitration as a mode of dispute resolution, the awareness and understanding of ADR as a whole system is lacking. The role of legal professionals, therefore, assumes relevance both for promoting ADR as well as advising on the non-judicial options available to parties.

 


Conclusion


A rapid paradigm shift is the need of the hour where stakeholders start accepting arbitration, conciliation and mediation as primary modes of dispute resolution (PDR). The journey from ADR to PDR is underway and with the efforts of the Supreme Court of India and the legislature, the gap between the two is diminishing. Whether arbitration, conciliation and mediation will become the primary mode of dispute resolution or not will depend on the implementation and enforcement of the existing framework. The implementation must be in line with the overall objective i.e. minimum judicial interference, meeting the interests of disputing parties, cost-effective and speedy justice. Moreover, apart from creating an appropriate regulatory framework for arbitration and mediation, promoting awareness amongst stakeholders is crucial. Further, developing capacities both in terms of infrastructure as well as professionals with the required skill set and specialisation for successfully administering ADR mechanisms for dispute resolution is also critical. The phrase alternative dispute resolution is going to stay but we hope that in times to come it will be used as a reference to litigation at least in commercial disputes.


† Registrar, International Arbitration and Mediation Centre.

†† Advocate.

[1] Arbitration and Conciliation (Amendment) Act, 2015; the Arbitration and Conciliation (Amendment) Act, 2019.

[2]Mediation for Everyone: Realising Mediation’s Potential in India, India-Singapore Mediation Summit, 2021.

[3]Government of India Ministry of Law and Justice, Answer to Unstarred Question No. 5042, Lok Sabha.

[4] See HERE .

[5] (2019) 20 SCC 406.

[6] Speech delivered by Chief Justice of India Shri N.V. Ramana at Mediation and Information Technology Conference, 9-4-2022.

One comment

  • Once an Arbitral Award is subjected to proceedings u/s 34, District Courts are not mindful of 34(6) and for them, it becomes a routine civil Suit thereby defeating the very purpose of ADR.. …………WHAT to DO ?

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