Development of ADR Laws in India

  • Generally, when a dispute arises, the parties take the issue to a court which will adjudicate it based on the facts and applicable laws. In this process, one party will face a loss while the judgment or decree or order favors the other.
  • To satisfy both the parties and to dispose of the issue in a shorter span of time, ADR is encouraged by the legal fraternity because delaying the finality of a case will erode the essence and will cause the parties to lose hope in seeking justice.
  • The ADR method promotes a legal “out of the court dealing” thereby preventing illegal shortcuts such as forgery, corruption etc., solely to get the judgment favoring them.

Need for ADR laws in India

India, with a population of over a billion, is facing major crisis such as unemployment, poverty etc., due to which a class conflict prevails every moment. This leads to an increase in disputes amongst its people. Such disputes maybe civil, criminal or commercial in nature. As every such dispute is litigated in the courts, there is a huge backlog of cases and the judicial wing finds it difficult to dispose them off. The courts are flooded with a plethora of cases dealing with minor matters which need not have to be litigated spending huge sums. Also, the cases lay pending in the courts for a very long time. So, in order to bring about an efficient case disposal and less time-consuming mechanism, ADR laws are the need of the hour. The backlog of cases can also be traced to the disequilibrium in the ratio of judges to the number of cases filed in a day. The former is way lesser than the latter and even if judges worked more hours a day, the pending cases cannot be disposed of easily.

With emergence of various companies, commercial ventures, the commercial relations too evolved to a larger extent. This in turn contributed to the increase in disputes such as issues arising out of partnership, contractual performance, Intellectual Property Rights (IPR), Trade mark, securities etc. Instead of spending large amounts on these disputes, which might add on to the financial burden of that company, ADR will be handy in dealing with them.

To put in points, the needs for ADR laws in India are as follows:

  1. To provide an alternate method to litigation. The ADR is an alternative to the traditional litigation process in courts. It offers a set of procedures to deal with disputes outside the court. It has to be noted that ADR is only an alternative and does not replace the judicial machinery.
  2. To provide a forum for the process of easy, less-expensive, simple and result oriented process for disposing of the cases.
  3. To dispose of cases expeditiously. Due to unsatisfactory infrastructure, cases are piled up in various courts for even more than decades. By legally bypassing cases to ADR mechanism, the pending cases will be disposed of quickly.
  4. To prevent filing of suits for trivial matters. Litigating for trivial matters is one of the causes for piling up of cases. So, to prevent this and to resolve such disputes, ADR will be very useful.
  5. To come up with amicable solutions for the disputes. ADR aims at bringing about cooperation between the parties to settle the dispute. It is not adversarial and helps better understanding of the differences between the parties.
  6. To cut unnecessary expenditures. Right from filing a suit till the final judgment, the litigants have to bear huge expenses. ADR will facilitate bypassing this hurdle as it is less expensive than ordinary suit.
  7. To maintain the relationship between the parties (e.g. husband and wife in matrimonial disputes).
  8. To prevent the parties from experiencing mental agony throughout the pendency of the case for years.
  9. To remove bias amongst the parties.
  10. To benefit both the parties without making one party win at the cost of other which is the prevailing situation in litigation.

Development of ADR in India

The concept of ADR is not new to India. The very ancient and significant dispute resolving forum is panchayat system more precisely nyaya panchayat in villages. It consists of five elderly persons to whom the dispute is submitted. The direction of those persons is binding on the parties who have to strictly adhere to it. However, the nyaya panchayats have become inactive now.

After the advent of the British, the modern arbitration law was introduced through the Bengal Regulation Act of 1772 and it was introduced in Bombay and Madras presidencies through the Bombay Regulation Act 1799 and the Madras Regulation Act 1802 respectively.

In 1899, Arbitration act was enacted, which was in line with the provisions of British Arbitration Act, and was applicable only to the presidency towns. Later on, provisions facilitating arbitration were incorporated in the Code of Civil Procedure, 1908, thereby extending its force other parts of British India.

Until 1996, the law governing arbitration in India consisted mainly of three statutes

  1. The 1937 Arbitration (Protocol and Convention) Act,
  2. The 1940 Indian Arbitration Act, and
  3. The 1961 Foreign Awards (Recognition and Enforcement) Act.1 The latter two acts were enacted to enforce foreign arbitral awards.

After Independence, the need for legal aid without financial burdens was felt and hence, the Legal Services Authorities Act was passed in 1987 under which Lok Adalat was statutorily recognized. The act also mandated the establishment of authorities at national, state and other levels to administer justice.

Subsequently, as the 1940 act was outdated, the Government of India enacted Arbitration and Conciliation Act in 1996, which was in line with UNCITRAL (United Nations Commission on International Trade Law) Model Law, repealing the previous enactments. With certain amendments, this enactment is still governing ADR system in India. Laws regarding ADR in India

There are two main enactments relating to ADR in India. They are Legal Services Authorities Act, 1987 and the Arbitration and Conciliation Act, 1996. The 1987 act statutorily recognized Lok Adalats for dispute resolution. It provided for establishing authorities at national, state, district and taluk level for the purpose of providing legal aid to all sections of people. It also mandates a separate fund at national, state and district level to facilitate the said objective.

The Arbitration and Conciliation act is the only live document dealing exclusively with ADR. This act repealed all the previous acts. The act, unlike the previous ones, incorporated principles of natural justice, fairness etc. it established ADR system as a separate dispute resolving mechanism free from judicial intervention/control. The act does not only cover domestic arbitration or conciliation but also extends to international arbitration and conciliation. The award granted in arbitration has the same status as a civil court’s decree. The act also provides for enforcing the foreign arbitration awards. An amendment to the Act in 2015, which makes the arbitrator responsible for the delay, makes the dispute resolution process quick and impartial.

Apart from these two laws, the Code of Civil Procedure 1908 also contains provisions relating to ADR. Amendment Act of 1999 incorporated section 89 to the code which provides that a court can direct parties to a case to go for alternate dispute resolution mechanism to reach a settlement rather than proceeding with it in the court.

Landmark judgments

The following are the landmark judgments which contributed to ADR in India:

In Bhatia International v. Bulk Trading , while dealing with the question as to the applicability of Part I and II of the Arbitration and Conciliation Act, 1996, the Supreme Court held that Part I shall apply to Part II as a result of which many foreign awards were tried in domestic courts as if they were domestic awards. These awards were refused enforcement too.

In Venture Global Engineering v. Satyam Computer Services Ltd, it was held that Indian courts had jurisdiction to set aside awards of foreign seated Arbitrations (which was only possible in domestic awards).

The above judgment was overruled by the Supreme Court in Bharat Aluminium Co. v. Kaiser Aluminium Technical Service (2012). The Supreme Court held that Part I of the Act does not apply to International Commercial Arbitration held outside India and that when parties have agreed to arbitration outside India, no Indian courts have jurisdiction to grant interim reliefs.

In Salem Advocates Bar Association, Tamil Nadu v. Union of India , the constitutional validity of the amendment act of 1999 and 2000 to the Code of Civil Procedure, 1908 was challenged and it was held valid by the Supreme Court.

The Madhya Pradesh High Court in Mahesh Kumar Agarwal v. Raj Kumar Agarwal held that parties shall not bypass the procedure established for challenging the appointed arbitrator authority by directly filing an application under section 11 of the 1966 act.

Conclusion

Alternate Dispute Resolution is a very useful mechanism to cope up with the lagging judicial process. Due to laggy infrastructure and rigid procedures, the judicial system is finding it difficult to deal with cases in a short span of time. So, to reduce the court’s burden, ADR is an effective mechanism. With growing population and recognition of wide rights, the inflow of cases has to be equally matched with the outflow which can only be possible if ADR is promoted to a greater extent.

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