Alternative Dispute Resolution System- Modes
- 2. WHAT IS ADR? Alternative dispute resolution (ADR) refers to a range of dispute settlement methods which help the parties in the dispute to come to a settlement without going to court, or without litigating on the said matter. These methods usually involve a third party, who helps them in settling the disputes. In many cases, ADR methods are used alongside the litigation process as well through court authorisation. It is intended to resolve conflicts without the involvement of a judge or jury (outside the court of law). This route is typically open whenever efforts between the client and the insurer to address any disagreements among themselves have failed and come to a standstill.
- 3. METHODS OF ADR Arbitration: It involves a voluntary and flexible method where parties choose the arbitrator(s) of their own choice. The award of arbitration is binding. Negotiation: This technique requires parties to be ready and cooperative in settling the dispute in the presence of an unbiased third party called negotiator. Conciliation: It is a method where parties try to improve and reconcile their relation with each other in the presence of a conciliator who helps the parties in the process. Mediation: It is an informal way of resolving disputes where a neutral facilitator called mediator helps parties to come to a mutual agreement as to settlement of disputes. Lok Adalat: It is one of the most effective methods of ADR as this involves voluntary actions of parties for solving disputes. It is very cost effective and is usually conducted on holidays so that it’s very convenient for parties to resolve disputes. Its primary purpose is peaceful and amicable resolution of disputes. Apart from that it is a speedier procedure and it saves money and anxiety cost of parties.
- 4. Arbitration Arbitration systems authorize a third party to decide how a dispute should be resolved. In arbitration, participation is typically voluntary, and there is a third party who, as a private judge, imposes a resolution. Arbitrations often occur because parties to contracts agree that any future dispute concerning the agreement will be resolved by arbitration.
- 5. Mediation Mediation and conciliation systems are very similar in that they interject a third party between the disputants, either to mediate a specific dispute or to reconcile their relationship. In mediation, there is a third party, a mediator, who facilitates the resolution process (and may even suggest a resolution, typically known as a "mediator's proposal"), but does not impose a resolution on the parties.
- 6. NEGOTIATION Negotiation systems create a structure to encourage and facilitate direct negotiation between parties to a dispute, without the intervention of a third party. In negotiation, participation is voluntary and there is no third party who facilitates the resolution process or imposes a resolution. It is based on the principle of "Helping People Help Themselves”
- 7. Benefits of ADR Flexibility of procedure - the process is determined and controlled by the parties of the dispute. Cost Effective Less complexity ("less is more"), Parties choice of neutral third party (and therefore expertise in area of dispute) to direct negotiations/adjudicate , Likelihood and speed of settlements, Practical solutions tailored to parties’ interests and needs (not rights and wants as they may perceive them), Durability of agreements, Confidentiality, The preservation of relationships and the preservation of reputations.
- 8. ADR in India Alternative dispute resolution in India is not new and it was in existence even under the previous Arbitration Act, 1940. The Arbitration and Conciliation Act, 1996 has been enacted to accommodate the harmonization mandates of UNCITRAL Model. To streamline the Indian legal system the traditional civil law known as Code of Civil Procedure, (CPC) 1908 has also been amended and section 89 has been introduced. Section 89 (1) of CPC provides an option for the settlement of disputes outside the court. It provides that where it appears to the court that there exist elements, which may be acceptable to the parties, The court may formulate the terms of a possible settlement and refer the same for arbitration, conciliation, mediation or judicial settlement. Due to extremely slow judicial process, there has been a big thrust on Alternate Dispute Resolution mechanisms in India. While Arbitration and Conciliation Act, 1996 is a fairly standard western approach towards ADR, the Lok Adalat system constituted under National Legal Services Authority Act, 1987 is a uniquely Indian approach.
- 9. Need for ADR in India The Courts are not in a position to bear the entire burden of justice system and that a number of disputes lent themselves to resolution by alternative modes such as arbitration, mediation and negotiation. ADR provided procedural flexibility, saved valuable time and money and avoided the stress of a conventional trial. In a developing country like India with major economic reforms under way within the framework of the rule of law, strategies for swifter resolution of disputes for lessening the burden on the courts and To provide means for expeditious resolution of disputes, there is no better option but to strive to develop alternative modes of dispute resolution (ADR). Which establishing facilities for providing settlement of disputes through arbitration, conciliation, mediation and negotiation.
- 10. RELEVANT CASE LAWS Cholamandalam Investment & Finance Company v. Amrapali Enterprises The Calcutta High Court held that an arbitration award issued by a unilaterally appointed arbitrator is considered non-existent (“non-est”) and cannot be enforced under Section 36 of the A&C Act, even if it has not been set aside under Section 34. The Court clarified that the executing court lacks the power to interfere with the award but can declare a “unilateral appointment award” legally invalid, treating it as null and void. It can direct the parties to readdress their dispute before an unbiased and impartial arbitral tribunal, as an award from a tribunal lacking inherent jurisdiction is not valid. Sunil Kumar Jindal v. Union of India The Bombay High Court held that the illegality of the appointment procedure does not invalidate the entire arbitration agreement. If an arbitration clause is partially invalid, the Court can remove the illegal portion while preserving the valid portion if the intention to arbitrate is clear.
- 11. N.N. Global Mercantile Pvt. Ltd v. Indo Unique Flame Ltd The Supreme Court ruled that an unstamped instrument without the required stamp duty is not legally enforceable. If such an instrument with an arbitration clause is presented in a Section 11 petition under the A&C Act, the Court must seize it. Only after impounding the instrument, ensuring payment of stamp duty, and obtaining the endorsement under Section 42 of the Stamp Act can the Court proceed with the petition. Without proper stamping, the arbitration agreement within the unstamped instrument has no legal validity. Overnite Express v. DMRC The High Court of Delhi held that a party cannot choose its arbitrator from a narrow panel of arbitrators maintained by the other party. The Court held that due to the restrictive nature of the panel, it limits the choice of the petitioner to choose one arbitrator from the five which amounts to unilateral appointment of an arbitrator. Hence, may create a doubt regarding the arbitrator being partial or biased.
- 12. Limitations of ADR Cost: While arbitration is generally a more cost-efficient legal settlement option, it might not make sense in cases when minimal money is involved. Rules of Evidence: A judge in a traditional court setting has specific regulations to follow when it comes to accepting evidence. Arbitrators, however, can utilize any information that is brought to them. Lack of Cross-Examination: The arbitration process generally includes documents and not witnesses, voiding the ability to cross-examine. Limited Discovery: In the event that arbitration is not filed until litigation has already begun, both parties lose the cost-saving advantage of limited discovery. Lack of Consistency: There are no set standards for arbitration, making it difficult to find consistency. It is possible that an arbitrator can be biased, which is sometimes the case in mandatory arbitration contracts. Lack of Evidence: Because arbitration is not evidence-based, you entrust the experience of the arbitrator to make the right legal decision. Not Public: The level of confidentiality involved in arbitration cases could potentially be disadvantageous to one party. There is also a lack of transparency, which is not the case in public courtrooms.
- 13. CONCLUSION In this modern age of globalisation and technology it is the need of the hour to find better ways of dispute resolutions. Although the ADR system is comparatively new, it has a great role to play in the future judicial system. Developed countries already prefer such methods for settlement of disputes because time is of essence in the modern era.
- 14. THANK YOU Regards: Adv. Ashish Guwalani