Alternative

Dispute
Resolution – An
Introduction
- Himanshi Bhatia
Assistant Professor (Law)
 Alternative Dispute Resolution or
Appropriate Dispute Resolution?

" Discourage litigation, persuade your neighbours to compromise,

whoever you can. Point out, the normal winner is often a real loser in
fees, expenses and waste of time"
- Abraham Lincoln
 Why not Adversarial Dispute Resolution?

" Unless something is done quickly, our dysfunctional legal system will prove to
be the biggest impediment to the country's growth...a legal system that is
drowning in cases and take years to deliver verdicts cannot effectively deliver
contracts"
- Times of India, Editorial dated April 22, 2008
 Objects of Alternative Dispute Resolution
(ADR)

a) To relieve court congestion as well as undue cost and delay;

b) To enhance community involvement in the dispute resolution process;
c) To facilitate access to justice; and
d) To provide more effective dispute resolution.

ADR includes Arbitration, Conciliation, Mediation, Negotiation etc.

Which Disputes can be settled through ADR?

In Afcons Infrastructure Ltd. Versus Cherian Varkey Construction Co. (P) Ltd. &
Ors., (2010) 8 SCC 24, the Supreme Court held that the following categories of
cases can be settled through ADR process:
1) All cases relating to Trade, commerce and contracts, including-
- disputes arising out of contracts, specific performance, between suppliers &
customers, between developers, builders and customers, between landlords and
tenants, and between insurer and insured.
2) All cases arising from strained or soured relationships, including
Continued

- disputes relating to matrimonial causes, maintenance, custody of children,

partition among family members, co-parceners, partnership among partners
3) All cases where there is a need for continuation of the pre-existing
relationship in spite of the disputes, includng
- disputes between neighbours, between employers and employees, among
members of societies, associations, apartment owners' associations
Continued

4) All cases relating to tortious liability, including- claims for compensation in

motor accidents/other accidents
5) All consumer disputes, including -
- disputes where a trader/supplier/manufacturer/ service provider/
professional reputation and credibility or product popularity; and
6) All offences which are compoundable
Which disputes cannot be settled through
ADR?

In Afcons Infrastructure Ltd. Versus Cherian Varkey Construction Co. (P) Ltd. &
Ors., (2010) 8 SCC 24, the Supreme Court held that the following categories of
cases cannot be settled through ADR process:
1) Representative suits under Order 1, Rule 8 CPC (which includes public
interest or interest of numerous parties)
2) Disputes relating to election to public offices
3) Cases involving grant of authority by the court after enquiry, for example suits
for grant of probate or letters of administration.
Continued

4) Cases involving serious and specific allegations of fraud, fabrication of

documents, forgery, impersonation, coercion etc.
5) Cases requiring protection of courts, as for example, claims against minors,
deities and mentally challenged and suits for declaration of title against
government.
6) Cases involving prosecution for criminal offences.
Above list is illustrative only.
 Settlement of Disputes Outside the Court (s.
89, Civil Procedure Code, 1908)

Where it appears to the Court that there exist elements of a settlement which may be
acceptable to the parties, the Court shall formulate the terms of settlement and give
them to the parties for their observations and after receiving the observations of the
parties, the Court may reformulate the terms of a possible settlement and refer the same
for-
(a)arbitration;
(b)conciliation;
(c)judicial settlement including settlement through Lok Adalat; or
(d)mediation. [ 1999 Amendment Bill]
 Continued
SEC.89(2) Were a dispute has been referred--
(a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996)
shall apply as if the proceedings for arbitration or conciliation were referred for settlement under the
provisions of that Act;
(b) to Lok Adalat, the Court shall refer the same to the Lok Adalat in accordance with the provisions of
sub-section (1) of section 20 of the Legal Services Authority Act, 1987 (39 of 1987) and all other
provisions of that Act shall .apply in respect of the dispute so referred to the Lok Adalat;
(c) for judicial settlement, the Court shall refer the same to a suitable institution or person and such
institution or person shall be deemed to be a Lok Adalat and all the provisions of the Legal Services
Authority Act, 1987 (39 of 1987) shall apply as if the dispute were referred to a Lok Adalat under the
provisions of that Act;
(d) for mediation, the Court shall effect a compromise between the parties and shall follow such procedure
as may be prescribed.]
Constitutional Validity of Section 89 CPC

In Salem Advocate Bar Association v. Union of India, 2003 (1) SCC 49 the
constitutional validity of the section was challenged and the intent behind its
inclusion lauded.
Criticism was muted as S. 89, CPC was a recent insertion at the time. It was
opined that the section had not been very effective as its modalities were yet to
be determined.
A committee (Justice M. Jagannadha Rao) was set up to draft model rules, and
the apex court recommended the adoption of these rules by the various High
Courts so as to give effect to section 89(2)(d), CPC.
Continued

In the subsequent decision of Salem Advocate Bar Association v. Union of India,

2005 (6) SCC 344, ["Salem II"] the apex court purposively reinterpreted S. 89,
CPC to reduce anomalies.
With respect to s. 89, the Court observed that if ADR fails, the matter will have
to got to trial. If parties choose arbitration, then provisions of A&C Act, 1996
will be applicable.
Thus, ADR has now obtained statutory recognition with the enactment of 1996
Act, Legal Services Authority Act, 1987 and rules of s.89 in the CPC, 1908.
 Afcons Infrastructure and Ors. v. Cherian Verkay
Construction and Ors [2010 (8) SCC 24]

- Process of referral to different modes of ADR under Section 89 of Civil

Procedure Code, 1908
- Kerala High Court held that the existence of pre-existing arbitration agreement
which was necessary under A&C Act, 1996 is inapplicable to references under s.
89 of the code.
- Referred the decision of Sukanya Holdings (P) Ltd. v. Jayesh H Pandya &
Anr. [2003 (5) SCC 531]
Issues:

i) What is the procedure to be followed by a Court in implementing section 89

and Order 10 Rule 1A of the CPC, 1908.
ii) Whether consent of all the parties to the suit is necessary for reference to
arbitration under s. 89 of the Code?
Supreme Court held:
i) If s. 89 is to be read and required to be implemented in its literal sense, it will
be a ‘trial Judge’s nightmare’, lays down impractical, if not impossible,
procedure in sub-section (1). However, validity of objective was held in Salem’s
Case.
Continued

ii) Court highlighted the drafting mistake in the mixing up of the definitions of
‘mediation’ and ‘judicial settlement’ under clauses (c) & (d) of sub-section 2 of
s.89 of CPC. Court suggested the interchange of the words in respective clauses,
will be in the true spirit of ADR mechanism.
iii) Another flaw ‘shall formulate the terms of settlement’, the Court was of the
view that if s.89 is to be interpreted literally then every trial judge before framing
issues, is required to ascertain whether any element of settlement as per the
process given. Thus courts doing the major work even for ADR.
Continued

iv) The supreme court questioned on such onerous and redundant burden upon the
Courts, of formulating the terms of settlement. Eventually diluted the anomaly in
Salem (II) by equating ‘terms of settlement’ to ‘summary of disputes’.
v) “How section 89 should be interpreted”, s. 89 and Order 10 Rule 1A shall be
interpreted after the pleadings are complete and after seeking admissions/denials
wherever required, and before framing issues, the Court will have recourse to s. 89 of
the Code.
Neither s. 89 nor Rule 1A (Order 10) is inteded to supersede or modify the provisions
of 1996 Act or 1987 Act.
Continued

vi) Whether reference to ADR Process is mandatory?

s. 89 uses both the words ‘shall’ and ‘may’ whereas Order X Rule 1A uses the
word ‘shall’ but on harmonious reading the word ‘may’ in s.89 only governs the
ADR process. Due to the words ‘where it appears to the court that there exist
elements of a settlement’.
“The above changes made by interpretative process shall remain in force till
the legislature corrects the mistakes, so that s. 89 is not rendered meaningless
and infructuous”
 Advantages of ADR

i) To reduce the pendency of cases

ii) Provides better solution to disputes more expeditiously and less cost than
litigation.
iii) ADR programmes are flexible and not afflicted with rigours of rules of
procedure
iv) ADR can be used with or without a lawyer.
v) It permits parties to chose neutrals who are specialists in the subject matter
of the dispute.
 Arbitration vs Conciliation

ARBITRATION CONCILIATION
The arbitration proceedings are quasi-judicial Conciliation proceedings are non-judicial in
in nature nature.
The matter is adjudicated through arbitral Parties arrives at a settlement with the
tribunal assistance of conciliator
It requires a prior agreement in writing to It may be initiated without such prior
submit to arbitration disputes agreement and relates generally to disputes
which have already arisen
The arbitrator does not merely assist in The role of conciliator is to assist the parties in
resolution of a dispute, he arbitrates, their attempt to reach an amicable settlement of
adjudicates and actually resolves an ‘award’ their dispute.
Continued

ARBITRATION CONCILIATION
An award is made and signed by the A settlement agremment may be made
arbitrator but it does not require by the parties themselves or with the
authentication assistance of the conciliator.
There cannot be a unilateral termination A party can unilaterllay terminate under
of arbitration proceedings s. 76 (d) by a written document.
An arbitrator can arbitrate only if the Conciliator acts as amicablr compositor
parties expressly authorised him to so to assist the parties to reach settlement.
act or decide.
 Judicial Process v Arbitration vis-a-vis
Mediation
Judicial Process Arbitration Mediation
Adjudicatory Process where third Arbitration is quasi judicial where Mediation is a non-adjudicatory
party (judge) decides the outcome arbitrator appointed by court or process. Mediator facilitates,
parties decides. parties directly participatesin the
dispute
Procedure are governed, restricted Procedures are governed, Procedures are governed,
and controlled by the provisions of controlled and restricted by the controlled and restricted by the
relevant Statutes provisions of Arb & Med Act, provisions of Mediation Act, 2023
1996
Decision is binding on the parties Award in an arbitration is binding Binding settlement is reached only
on the parties if parties arrive at a mutually
acceptable agreement

Adversarial in nature Adversarial in nature Collaborative in nature

 Continued

Judicial Process Arbitration Mediation

Personal appearance or active Personal appearance or active Personal appearance or active
participation is not always participation is not always participation of the parties are
required required. required.
A formal proceeding held in A formal proceeding held in A non-judicial and informal
public and follows strict private following strict procedural proceeding held in private with
procedural stages stages flexible procedural stages
Decision is appealable Award is subject to challenge on Decree/order in terms of the
specified grounds. settlement is final and not
appealable
Involves payment of court fees Does not involve payment of court In case of settlement, court
fees annexed mediation the court fee
already paid is refundable as per
the Rules.
 Mediation v Conciliation vis-a-vis Lok Adalat

Mediation Conciliation Lok-Adalat

Lok-Adalat is non-adjudicatory if
it is established under s. 19 of
Mediation is non-adjudicatory Conciliation is non-adjudicatory 1987 Act. Lok Adalat is
process process concilioatory and adjudicatory
established u/s 22B of 1987 Act.
Voluntary Process Voluntary Process Voluntary Process
Service of lawyer is available Service of lawyer is available Service of lawyer is available
Mediator is a neutral third party Conciliator is a neutral third party Presiding officer is a neutral third
party.
Mediation is party centered Conciliation is party centered In Lok Adalat, the scope of
negotiation negotiation negotiation is limited
Continued

Mediation Conciliation Lok Adalat

The function of the Mediator is The function of the conciliator The function of the Presiding
mainly facilitative is more active than the officer is persuasive
facilitative function of
mediator
Consent of the parties is not Consent of the parties is Consent of the parties is not
mandatory for referring a case mandatory for referring a case mandatory for referring a case
for mediation to conciliation to Lok Adalat
Not Appealable Decree/order not appealable Award not appealable
Focus of mediation is on the Focus of conciliation is on the Focus of Lok Adalat is on the
present and the future present and the future Past and the Present
Continued

Mediation Conciliation Lok Adalat

Mediation is a structured Conciliation is also a Process of Lok Adalat
process having different structured process having involves only discussion
stages different stages and persuasion

Parties are actively and Parties are actively and Parties are not actively
directly involved directly involved and directly involved so
much
Confidentiality is the Confidentiality is the Confidentiality is not the
essence essence essence