UNIVERSITY OF PETROLEUM & ENERGY STUDIES

SCHOOL OF LAW

B. COM., LL.B. (HONS.) TAXATION LAWS

ACADEMIC YEAR: 2019- 20 SESSION: JANUARY-MAY, 2020

SEMESTER- VIII

PROJECT
FOR

Arbitration and Conciliation & ADR Mechanism

“Importance of ADR in the current Indian scenario”

Under the Supervision of:

Ms. Anjali Bhatt

Name-Nitish Kumar Naveen

SAP-500054889

ROLL No.-063
INTRODUCTION

To deal with the situation of pendency of cases in courts of India, ADR plays a significant role in
India by its diverse techniques. Alternative Dispute Resolution mechanism provides
scientifically developed techniques to Indian judiciary which helps in reducing the burden on the
courts. ADR provides various modes of settlement including, arbitration, conciliation, mediation,
negotiation and Lok Adalat. The ADR mechanism has proven to be one of the most efficacious
mechanisms to resolve commercial disputes of an international nature. In India, laws relating to
resolution of disputes have been amended from time to time to facilitate speedy dispute
resolution in sync with the changing times. The Judiciary has also encouraged out-of-court
settlements to alleviate the increasing backlog of cases pending in the courts. 

The present mode of access to justice in India is based on the adversarial legalism. This system is
generally followed in the common law countries. In this mode of justice the State plays a neutral
role and it is parties who are responsible for initiating and conducting litigation. However, any
crime is considered as an offence against the State in which such proceeding is initiated. This
mode of justice was adopted by the Britishers to exploit the masses in their colonies. The whole
set up was for the convenience of the administration in which the position of the power addressee
was very pathetic. If we analyse the adversarial legal system, we could find that there is no parity
of power between the parties to the dispute.

As a result, alternative dispute resolution mechanisms have become more crucial for businesses
operating in India as well as those doing businesses with Indian firms. So Alternate Dispute
Resolution (herein after as ADR) is necessary as a substitute to existing methods of dispute
resolution such as litigation, conflict, violence and physical fights or rough handling of
situations. It is a movement with a drive from evolving positive approach and attitude towards
resolving a dispute.

It discriminates on the social, economical and political ground and thus directly hit to the root of
the Constitution. The adversarial system of justice is plagued by the high cost of litigation, delay,
technicalities of law, uncertainty and exploitation of parties by the advocates. Therefore, it is
necessary to think over the inquisitorial form of justice. Alternative Dispute Resolution
(hereinafter ADR) has emerged as a solution to the problems posed by the adversarial system of
Justice at least in the small cases.

HISTORY OF ALTERNATIVE DISPUTE OF RESOLUTION IN INDIA:-

ADR is not new to India. Mediation was a method of dispute resolution in India even centuries
before British arrived. In ancient time there was Panchayat System in India. This system was
used by the village heads to resolve community dispute. It is prevalent in Indian society till date.
Mediation was used as a tool to resolve the dispute even in the businessmen class in pre-British
period. At that time impartial and respected businessman were requested by business association
members to resolve disputes through informal procedure.

In pre-British period in tribal areas disputes were resolved by panchas, who were wise persons of
that locality. The disputant members of a tribe used to present their dispute to the panchas who
had to work out for settlement. In case of its failure it was referred to a public forum attended by
all interested members of the tribe for resolution. After considering the dispute, available
solution, interest of the tribe in great detail, panchas used to try once more to resolve it. If
settlement was possible yet, then the panch rendered a decision that was binding upon all the
parties. However, the decision of the panchas was not arbitrary rather it was based on the tribal
laws as well as such other consideration which was necessary to maintain harmony and
prosperity. The main significance of this system was that all proceedings were oral and there was
no record of the outcome. Instead of legal authority those kinds of dispute resolution procedures
were regularly used and commonly accepted in the Indian society.

Thus, in India ADR is not a new concept rather ADR relating resolution has been amended from
time to time to cater speedy dispute resolution. Indian judiciary has also encouraged it at various
occasions. For eg: In Salem Advocate Bar Association v. Union of India The Honourable
Supreme Court of India directed the constitution of an expert committee to formulate the manner
in which the provision relating to ADR incorporated in Section 89 of Civil Procedure Code –
1908 has to be brought into operation. For the effective implementation of ADR mechanism,
several organizations and institutions like ICA, ICADR, Consumer Redressal Forum and Lok
Adalat were revived.
NEED FOR ALTERNATIVE DISPUTE METHODS:-

The main reason for the origin or need of the ADR is the tiresome processes of litigation, costs
and inadequacy of the court system. It has ability to provide quick and cheap relief. The present
mode of adversarial system fails in providing the real justice between the parties. The party, who
approaches the Court of justice with pain and anguish in their heart, faces various problems and
suffers physically, economically and mentally. The present system fails to deliver quick and
inexpensive relief to the party. The procedure is also very complex. This leads to a search for an
alternative mechanism which should be inexpensive, quick and with supplementary to the
process of the traditional civil court. However, at the same time the elements of judiciousness,
fairness, equality and compassion cannot be discarded for expeditious disposal. It is well said
that “justice delayed is justice denied” and at same time, it is also said that “justice hurried is
justice buried”. In Fuerst Day Lawson Ltd v Jindal Exports Ltd 1 the Honourable Supreme Court
held observed that the object of Alternative Dispute Resolution Act 1996 is to provide speedy
and alternative solution to the dispute and avoid protraction of litigation. The provisions of the
Act have to be interpreted accordingly. Alternative Dispute Resolution promotes amicable
settlement and help in the preservation of the relations. Since there is direct involvement of
parties in the settlement process there is no need of the involvement of technical and formal
procedures. However, amicable settlement does not mean compromise at any cost rather it is
reasonable compromise factor.

Alternative Dispute Resolution promotes amicable settlement and help in the preservation of the
relations. Since there is direct involvement of parties in the settlement process there is no need of
the involvement of technical and formal procedures. However, amicable settlement does not
mean compromise at any cost rather it is reasonable compromise factor.2

DISADVANTAGE OF LITIGATION
1
(2001) 6 SCC 356: AIR 2001 SC 2293

2
P.C Rao & William Sheffield, ADR IN THE CONSTRUCTION INDUSTRY, Universal Law Publishing Co. Pvt.
Ltd., 1997, P.316
Article 21 encompasses all conceivable human rights within its ambit. It is a directive to the
State to refrain from infringing the right of life or personal liberty of a person. In Hussainara
Khatoon v. Home Secretary, State of Bihar, the Honourable Supreme Court held right to speedy
trial as a part of right to life or personal liberty. In Abdul Rehman Antulay v. R. S Nayak, the
court asserted that the “Right to speedy trial” flows from Art. 21 and encompasses the stages
right from the date of registration for the FIR and onwards, remains unaltered.

Following are the disadvantages of litigation:-

1) Cost – The present adversarial system of litigation is too expensive and at times the cost
exceeds the value of the claim. It is expensive, financially and emotionally both. The cost of
litigation includes the payment of court fees, fees paid for summons and other processes,
advocates fees etc. Though the government pays to the judges and provide building and other
infrastructure necessary to try cases. Yet the fact is that the litigant has to bear the high cost
in the litigation and the most important expense is to bear the lawyer’s fees.
2) Delay – The delay is the most disadvantageous part of the litigation. If we look at general
proceeding in Civil cases it takes at least 15-20 years to be decided. In some of the cases it is
the next generation which litigate the dispute.In grave criminal cases also it takes at least
decade. The delay result into the physical, mental and financial harassment.
3) No Parity of Power – There is no parity of power between the wealthier litigant and under
resource litigant. Parity of power refers to the balance between the parties. If one party is rich
and other is poor than there is all chances of the exploitation of the later. The reason is that
the rich person can afford the best lawyer of the country whereas the poor person will not be
in a position to afford such lawyer. Secondly, the delay overburdens the expenses of the
litigation. Therefore, the time will come when the poor person would abandon his claim or
go for out of court settlement.
4) Uncertainty – There is no certainty about the result of the litigation and how long it will last
which induces the fear of incomprehensible to litigants. There is no chance of reconciliation
in family disputes. Parties never forget the bad things said by their spouses at the trial.

5) Lack of expertise – There is lack of expertise of judges in the present legal system in
commercial and technology disputes matter. This has resulted in wrong decisions and
 consequential appeals to higher forums. For example – In matter relating to building the
person chosen to decide the matter should be normally an expert in the subject matter of
dispute, whereas the judges in the court will seldom have any practical experience of the
technicalities of the trade in question. Therefore, they can’t appreciate the matter
satisfactorily. Even if experts are called to assist them, their opinion is not binding upon the
judges.

6) Win – lose Scenario – In present legal system Court act as Courts of law and not as court of
equity. It leads to win- lose scenario, there is no mutual acceptable decision.

7) No privacy –The disadvantage of litigation is that pleading and document filed in the court
becomes public document and any person can have access of it.

METHODS OF ALTERNATIVE DISPUTE RESOLUTION AND ITS MERITS AND

DEMERITS

The administration of justice is one of the essential functions of the State. Considering those
disadvantages it can be said that the time demands, some alternative methods for resolving the
disputes, much quickly and efficiently. Therefore, the method like arbitration, mediation,
conciliation, specialised tribunal, consumer forum etc. was evolved. Lok Adalat is the fine blend
of all. Following are the methods of Alternative Dispute Resolution:-

(i)Lokadalat – In 1987, the Legal Services Authorities Act was enacted by the Parliament which
came into force on 9th November, 1995 with an object to establish a nationwide uniform
network for providing free and competent legal services to the weaker sections of the society on
the basis of equal opportunity.

Lokadalat means “People’s Court”. There are mainly two object of Lok Adalat:- a) It is to
provide quick, accessible, non-technical, sympathetic and homely forum for resolution the
disputes, and

b) To resolve the disputes in a conciliatory spirit.

This method facilitates the parties to come to some form of agreement irrespective of whether
they answer the requirement of law or not. It is a form of administrative method of dispute
resolution.

(ii) Arbitration and Conciliation – The Arbitration and Conciliation Act -1996 provides an
alternative mode of dispute of resolution through arbitrator and conciliator.

(iii) Mini Lok Adalats –

With the object of providing justice to rural and tribal people mini lok adalat was constituted at
sub-district level and in villages. It cater justice to them at their door-step. Local advocates and
officials and social workers take part in the mini lok adalat.

(iv)Village Courts – These are units of self-government. They are like village panchayat. Village
panchayat is under the subject of state list. There are five members in the village court. In some
state these members are elected whereas in some they are nominate. There is no need of legal
qualification to become the member.

(v) Mediation Centres – Mediation centre originated in year 1983, in Tamil Nadu, in rural areas
under the Tamil Naidu Legal Aid and advice boards. The main object of the mediation centre is
to promote settlement of disputes which came before it. There is participation of local social
worker and mediator –lawyers.

(vi) Family Courts Act of 1984- It was enacted to establish family courts with the object to
promote conciliation and speedy settlement in marriage and family cases. It deals with conjugal
right restitution, decree of nullity, judicial separation and dissolution marriages
ADVANTAGES OF ADR:-

A judge is considered to be trained in the law in order to decide legal issues and parties are not
required to pay him. Then the question arises what is the need of appointing an arbitrator? The
answer to this question is that a judge may be expert of law but he cannot be expert of all laws
particularly the new emerging technological fields. Such as – Cyber law, IT law, Buiding
Construction work, Investment law etc. In fact, it is not possible for any human being to be the
master of all laws. In the 176th report of the Law Commission, Justice B.P. Jeevan Reddy has
suggested that “the principle of least court interference may be fine principle for international
arbitration awards but having regard to Indian conditions and the fact that several awards are
passed in India as between Indian nationals sometimes by lay men who are not well acquainted
with law, the interference with such awards should not be as restricted as they are in the matter
of international arbitrations.”3

Justice Malimath Committee Report –

It was recommended by the committee that after the framing of the issue it should be made
obligatory for the court to refer the dispute for settlement either by way of arbitration,
conciliation, mediation, or through Lokadalat. Following are the some advantages of ADR:-

(i) Privacy and Choice in the Tribunal – One of the major significance of arbitration is
privacy and confidentiality of the proceedings. Some people prefer to settle their dispute
out of the public gaze. Particularly in matrimonial disputes it is very effective. Because
people don’t want that their private disputes to come in the public. Arbitration also saves
matrimonial home and relations because the dispute is resolved peacefully with the
consensus of the parties. If matters come to the ordinary civil court in most of the cases
the relation become strained and family shatters. Further, some disputes involve highly
technical issues therefore it would be useful if at least one member of the tribunal is
expert in that field. Since in arbitration it is the party who select the member of the
tribunal, they select at least one member expertise in that field. However, in the ordinary

3
Reddy,B.P.Jeevan, “Law Commission of India 176th Report on the Arbitration And Conciliation (Amendment)
Bill, 2001”, 12th September 2001, available at: httplawcommissionofindia. nic.inarb.pdf accessed on April 27,2020
 court judge may not be expert in that field and therefore we can’t expect proper justice in
that case.

(ii) Flexibility – Arbitration is very much flexible both in time and procedure. If dispute
needs urgent resolution, the parties can choose a tribunal who will act promptly rather
depending on the luck of the draw from a court list. The parties are also free to choose
the most suitable procedure. The parties are also free to be represented by anyone of
their choice and they are not bound by rules limiting appearance to persons with
particular legal qualifications.

(iii) Neutrality and Equality – Where the parties belongs to the different countries they don’t
wishes to litigate in the ordinary court of law rather they prefer arbitration. Because
arbitration offers them neutrality in the choice of law, procedure and tribunal. They can
choose the law and procedure of the third or they can appoint an arbitrator which belongs
to the third country. It gives them confident of equality and there is parity of power
between them.

(iv) Principal of Natural Justice – Arbitrator is not bound by the strict procedure of the Civil
Procedure Code and law of evidence. However, he has to follow the principle of natural
justice. It is one of the advantage of the alternative dispute resolution that it avoids
technicality and complexity of law and focus on the problem of the disputant parties and
try to resolve it with simple method or procedure.

(v) Enforceability of award – Another advantage of the arbitration is the extensive

enforceability of the award. Today, there are various conventions which recognise
arbitral awards and enforce it in many countries than English court judgment.

(vi) Control over both the process and the outcome – An important benefit of using ADR
methods is that the disputant has control over both the process and the outcome of the
resolution.

(vii) Amicable Settlement - Alternative disputes method promote amicable settlement of

dispute. It enables the parties to resolve the dispute and bury the past. Which results in
the preservation of the present relation and at the same time it paves better for future.
(viii) Payment of Court fee – In Alternative Dispute Resolution there is no need of
payment of Court fees as it is paid in the ordinary court before the hearing of civil cases.
If court fee is not paid, the court does not entertain the suit. Sometimes, the parties are
not in a position to pay the court fee. ADR is the best resort for those kind of people.

(ix) Procedural flexibity – ADR provides procedural flexibity which is not found in the
traditional court. It may be as casual as a discussion around the conference table. The
disputant has freedom to choose the procedure and applicable law.

(x) Win- Win Situation – The Court procedure results in win-lose situation. In other words,
in the ordinary court litigation a party shall either win the case or lose his claim. On the
contrary, in ADR a person may not get all that he wants, but he will certainly not lose
everything.
.
Conclusion

Belief in alternative dispute resolution takes on the character of a moral value. For believers it
represents a “best practice” not only in producing technically superior outcomes but of being
“the right thing to do”. To conclude, it is suggested that ADR system should be institutionalized.
But at the same time a caveat is also suggested, that one must be careful to avoid the
dysfunctions that frequently accompany successful institutionalizations. Because the ADR
movement is still in the formative stage, there is much to learn about the feasibility of
alternatives to litigation. ADR is, as yet, a highly speculative endeavor. We do not know whether
ADR programs can be adequately staffed and funded over the long-term; whether private
litigants will use ADR in lieu of or merely in addition to litigation; what effect ADR may have
on our judicial caseload; whether we can avoid problems of "second class" justice for the poor;
and whether we can avoid the improper resolution of public law questions in wholly private fora.
In light of these and other uncertainties about ADR, we should continue to view alternative
dispute resolution as a conditional venture, subject to further study and adjustment. Every new
ADR system should include a formal program for self-appraisal and some type of "sunset"
arrangement to ensure that the system is evaluated after a reasonable time before becoming
permanently established.

The ADR movement needs to be carried forward with greater speed. This will considerably
reduce the load on the courts apart from providing instant justice at the door-step, without
substantial cost being involved. If they are successfully given effect then it will really achieve the
goal of rendering social justice to the parties to the dispute.