Arbitration, Mediation and Conciliation in India

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February 8, 2018

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In this article, Sheetal Sharma of KIIT law school discusses Arbitration, Mediation
and Conciliation in India. How effective are they?

“The richest love is that which submits to the arbitration in time” -Lawrence Durrell-

Introduction
Arbitration, mediation and conciliation are the main Alternative Dispute Resolution
Mechanism which is generally adopted by the people to resolve their disputes in an
informal manner. They try to reach a solution by settlement or negotiation with the
assistance of a third neutral party and have turned out to be an effective alternative to
the litigation process.

What is alternative dispute resolution?

When the method of resolution of the dispute chosen by the parties is other than the
arbitration, in the form of mediation, negotiation, conciliation, Lok Adalat, online
arbitration, then it is Alternative Dispute Resolution (herein referred to as ADR). ADR
opens the way in the field of business and tends to solve the matter more efficiently and
effectively. It is basically a dispute settlement through negotiations. In the arbitration, a
dispute is decided by imposing an award, but ADR is more likely to find a solution to the

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dispute by negotiating between both the parties. The purpose of ADR is more than
merely giving a remedy to the parties. It aims to ensure that the contract operates
properly.

Arbitration as an effective mechanism for dispute resolution

Arbitration is a form of dispute resolution method in which the parties avoid the court
proceedings and instead decide to resolve their dispute through appointing a third
person, who is known as an arbitrator. An arbitrator is appointed in labour disputes,
business and consumer disputes and family law matters.

“an arbitration is the reference of dispute or difference between not less than two
parties, for determination after hearing both sides in a judicial manner by a person or
persons other than a court of competent jurisdiction.”[1]

History of arbitration in India

Arbitration was practised in India from the ancient times through Puga, Sreni, Kula and
Panchayat. These were the bodies who decided and resolved the disputes in the
alternative of courts. After that many acts were passed to give arbitration a uniform
meaning and to give it a statutory recognition. The recent act of arbitration was ‘The
Arbitration and Conciliation Act, 1996’ which was amended in the year 2015, due to
certain drawbacks in the said act.

The prospects of the arbitration or the reason due to which it is more

preferable
Expertise in technical matters: an arbitrator can easily deal with technical matters
which is scientific in nature because arbitrators are appointed on the basis of their
knowledge and skill in the particular field. So they can resolve the dispute more
efficiently and effectively.
The process of arbitration works more quickly and is more cost-effective than the
courts.
There is the convenience of the parties in arbitration as they are free to decide the
venue and time of the proceedings.
Privacy and confidentiality of the parties are maintained as there is no
unnecessary publicity of the dispute.
Arbitration is more flexible as compared to courts as they do not have to follow
strict rules and regulations as that of court because of the rules set by the parties
only.

Due to these advantages of the arbitration, parties prefer it over litigation. It gives party
full authority to decide their own arbitrator, and in case of international arbitration, the
venue, place or the country in which the arbitration proceedings will be held is also
decided by the parties.

However, there are also certain challenges where the arbitration lacks or defaults in
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providing proper arbitral awards and claims. Everything with some advantages also has
loopholes along with it.

Arbitration system faces some challenges which are briefly discussed

If the parties, by agreement decide the arbitral award and decision to be final,
then they waive their rights to access the courts.
Sometimes the arbitrator acts biased, due to which the very essence of arbitration
is lost.
There is not always the case where the cost of the arbitration is cheaper. It can
vary in complexities and may lead to a higher cost than the litigation. It can be
seen in multiple parties, multiple arbitrators and complicated legal disputes.
It is very difficult to appeal arbitral rulings. Sometimes a party can face unfair
result and finds the difficulty in appealing to the courts.

Moreover, arbitration is preferable in the matters of commercial dispute and there is

increased development in the arbitration law adopted in our country to make it more
effective and reliable. No matter what is said, it will always be regarded as the usual
method for resolving an international commercial dispute.

Conciliation as an ADR mechanism

Conciliation is a type of ADR where the settlement is made out of court. There is no
involvement of the court in the whole arbitral proceedings. The dispute is settled by a
neutral third party, who is the conciliator. The conciliation process is voluntary as it is
on the mutual discretion of the parties to choose conciliation as a method of resolving
their dispute with the assistance of the conciliator, also the proposal is not binding upon
the parties. They are free to follow or not follow the proposal given by the conciliator. It
presides over litigation because the parties do not have to go through the technical
procedures and formalities of litigation, instead, conciliation allows parties for a
friendly search to reach an amicable solution.

The adoption of conciliation process in India

The adoption of conciliation process was first recommended by the Law Commission of
India in 77th and 131st report and in the conference of chief ministers and chief justices
in their resolution of 1993. Whereas, the Himachal Pradesh High Court evolved pre-
trial, in-trial and post-trial conciliation project in the subordinate court in Himachal
Pradesh in the year 1984. The Calcutta resolution which was adopted in 1994, also
stated the recommendation of conciliation courts to be constituted in the other states.

With the adoption of conciliation rules, 1980 by the UNCITRAL, the Parliament of India
also find it expedient and enacted Arbitration and Conciliation Act, 1996 which gave
statutory recognition to conciliation. With this, the post-litigation conciliation was

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recognised as ADR with the incorporation of section 89 of Code of Civil Procedure,
1908[2] providing an option for reference of sub judice matters to conciliation with the
consent of the parties.

Issues in post-litigation conciliation

The main issue in post-litigation conciliation is the preference of judiciary towards
mediation over conciliation. Since mediation and conciliation are almost the same, the
publicity of mediation and its recognition as a mode of court-annexed mediation has
been preferable than conciliation. Due to this, it is not utilized to its full potential.
Under section 89 of the CPC, the courts can refer any dispute for judicial determination
to any of the ADR mechanism namely, arbitration, conciliation, mediation etc. Among
them, mediation and Lok Adalats are mostly used, which lacks chance for conciliation to
grow potentially at the post-litigation stage.

Mediation in the dispute resolution mechanism

Mediation has grown as the most advanced form of ADR mechanism. It is one of the
methods for handling human relationships in a positive manner, mainly for the good of
the people involved and for the betterment of the community.[3]

Mediation encourages a search for the solution by the parties themselves, involved in
the dispute. The basic motive of mediation is to provide opportunities to parties to
negotiate and come to a final solution catering the needs of both sides. It is an assisted
negotiation and an informal process in which parties are aided by a third impartial
person, who is the mediator, possessing specialized skills, requisite training and
sufficient experience necessary to assist the disputed parties for reaching a negotiated
settlement.

Role of the mediator

The role of the mediator is only to assist the parties. He does not have to decide who is
right or wrong and also does not have authority to impose a settlement on the parties.
Instead, it provides a forum for principled negotiations. Parties come to recognise their
true rights and needs, instead of reiteration of their rights and they also come to realise
that solution can be reached by satisfying each other’s needs.

It is often said that mediation is the best way of imparting justice through self-
mediation of the parties. Mediator empowers the parties to communicate and decide the
outcome on their own by providing various options suitable as per the dispute and has
to think of alternative solutions favouring a mix of benefits to both parties.

In brief, Mediation is all about facilitating or assisting negotiation between the parties.
Mediation works between the parties because it gives chance to the parties to come to a
settlement where both parties do not have to compromise their rights instead leads to a
better solution.

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Growth of mediation centres in India and Its impact on ADR mechanism
In India, mediation as a mode of ADR mechanism has been accepted in its fundamental
and generic form. It has been widely utilized in Delhi, which has indeed been one of the
pioneers in institutionalizing mediation. In India, mediation got legislative recognition
for the first time in 1947, through Industrial Disputes Act,1947. The enactment of
section 89 of CPC was focused by the judiciary to popularize and propagate mediation
as an ADR mechanism.

In furtherance of this, the judiciary also prepared a “National Plan for Mediated
Settlement of Dispute” for developing training of mediators, development of mediation
manuals, setting up of mediation centres in court complexes and spreading awareness
about mediation against litigants so as to popularize mediation.[4]

Also, various mediation centres have been established in Delhi for resolution of disputes
in pending cases. The growth of mediation centres in Delhi can be seen through the
institutional as well as ad-hoc private mediation in Delhi which is always available and
open for the parties to take recourse to mediation for settlement of their disputes
outside the court-annexed mediation centres before they invoke the jurisdiction of
courts.

There are various institutions available in Delhi offering professional mediation services
at the pre-litigation as well as the post-litigation stage. The Indian Legislature also
enacted The Legal Services Authority Act, 1987 by constituting National Legal Service
Authority as a central authority vesting with various duties like encouraging for the
settlement of disputes by way of negotiation, arbitration and conciliation, etc.

Court-annexed mediation
When the cases are solved with the help of court accredited mediators, that is often
referred to as court-annexed mediation. The mediation services are viewed as part and
parcel of the same judicial system, instead of a separate court-referred mediation, where
court refer the cases to private mediators so that no one would feel that the case is
separated from the court system. ADR services under the control and guidance of
judicial system would ensure smooth functioning, authenticity and acceptance from the
public. It would ensure the mediation in coordination with the courts and not be viewed
as competition to the courts.

How mediation is helpful for the courts?

With the cooperation of mediation services, courts can easily refer the cases to
mediators and deal with the cases which are more important for public matter without
wasting time on small petty cases, which can ensure in reducing the loads and pending
of cases at a manageable level. And also, the mediators will have a positive feeling from
the support of the judges and make the process more expeditious and harmonized. It
would lead to faster settlements and public confidence and would ensure a feeling that
the mediation is working hand in hand with the same system.
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This is not as easy as we think because the general public is not always willing to accept
the new change about which they are not properly aware of. It is a new idea which is
introduced in India and we cannot in any circumstance expect from the public to adapt
to the new change quickly. Here arises the problem for court annexed-mediation.

Obstacles in the implementation of this mechanism

the unavailability of sufficient funds to introduce this machinery in the country.

Second, in a country like India, where we have an established judicial system the
court is seen as the place to go when disputes arise and cannot be viewed as a
mechanism where it can be sorted out by the parties themselves.[5]

Thus, the public at large refuses to accept where the court is not directly involved. They
only accept when they see that it has the stamp of approval of the court because then
they do not have any fear as they are already accustomed to the court system.

Why you should choose mediation?

Mediation is confidential, non-binding and parties get to choose an alternative provided
by the mediator. The mediator guides for reaching an amicable solution for both the
parties. No strict procedures are followed by the parties which makes the whole
proceedings more informal and comfortable.

Why is ADR preferred more than litigation?

ADR has gained a rapid popularity over the years. The business disputes are resolved
more by the arbitration process than the litigation. The reason for acceptance of
arbitration over litigation is due to many reasons.

1. Arbitration is more cost-effective. The cost of the process involved in the dispute is
much less than the cost involved in the litigation.
2. The process is more informal as compared to the litigation process. There are no
lengthy procedures as that is present in the court.
3. ADR process is flexible. The parties can withdraw their case anytime they want
which, is not possible in the court process.
4. The dispute is resolved more quickly with the assistance of a third person, who
advises the parties according to their needs and suitability. This is not same in the
case of the court process. The judges do not give judgment according to the
suitability of the parties.
5. The resolution of the dispute is made faster. On the other hand, filing cases in the
court take years and years to resolve one case.
6. In ADR, an approach is made to balance the interest of both the parties. Whereas,
in the litigation, the other party loses the case.
7. Discussions of the proceedings in ADR is confidential and no public record is to be
maintained. The discussions in the court involve knowledge of the public.

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 8. The venue and schedule are according to the convenience of the parties as they
have the power to choose the arbitrator, the place of the proceedings etc.

How arbitration, mediation and conciliation are different from

each other?
Mediation and conciliation both are an informal process. Whereas, arbitration is more
formal as compared to them. In mediation, the mediator generally sets out alternatives
for the parties to reach out an agreement. The main advantage of the mediation is that
the settlement is made by the parties themselves rather than a third party. It is not
legally binding on the parties.

Arbitration is a process where the parties submit their case to a neutral third party who
on the basis of discussion determine the dispute and comes to a solution.

Dispute resolution through conciliation involves the assistance of a neutral third party
who plays an advisory role in reaching an agreement. The process adopted by all the
three are different but, the main purpose is to resolve the dispute in a way where the
interest of the parties is balanced.

Conclusion
Arbitration, mediation and conciliation are considered as the main alternative dispute
resolution mechanism to litigation. Business people prefer these mechanisms more
convenient because it does not require a lot of lengthy procedures like courts. Here,
dispute resolution is more informal as compared to litigation in courts. Over the recent
years, they have turned out to be more effective than the litigation process. Access to
justice is there without the involvement of the court. Parties are more comfortable as
they can freely express their own views, needs and interest.

References
[1] Halsbury’s Laws of England para 501 (vol.2, 4th edition).

[2] Inserted by the Code of Civil Procedure (amendment) Act, 1999.

[3] DK Sampath, Mediation 8 (NLSUI, 1991).

[4] Justice K.G. Balakrishnan, former Chief Justice of India (Law Day address to the
Nation on November 25, 2008).

[5] Sriram Panchu, Mediation Practice and Law, The path to successful dispute
resolution, 255.

[6] https://www.tpsgc-pwgsc.gc.ca/gcc-bdm/differences-eng.html

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