Recent developments in the alternative dispute

resolution (ADR) - iPleaders

16–20 minutes

This article is written by Revati Magaonkar, from Dayanand College of Law. This article is throwing a
highlight on the recent development in the alternative dispute resolution (ADR) system.

 Introduction 
 Alternative dispute resolution 
o Definition
o Concept of alternative dispute resolution 
 Recent developments
o Virtual ADR
o Impact of COVID-19 on the alternative dispute resolution 
 Amendment of 2021
o 2021 Amendment’s effects on India’s arbitration 
 The impact of the automatic stay on awards 
 Expanding the scope of qualification of the arbitrators
o Views of Justice Chandrachud – decentralization of justice
 Emergency arbitration
 Conclusion
 References

Introduction 
Alternative dispute resolution is a system that indicates an optional legal mechanism for solving disputes
outside the court. It is one of the most growing and developing industries in the legal sector. Many
organizations, companies, unicorns, or new emerging startups are utilizing the alternative dispute resolution
system for avoiding unnecessary suits in the court of law and also saving their time and money. Apart from
going to court for minor issues, disputes which arise out of a transaction or relationship can be solved in a
simple, straight, and time-saving way,  with the help of ADR. It deals with matters related to family,
commercial contracts, negligence, partnerships, public disputes, etc.

Definition
Alternative dispute resolution (ADR) is a process by which disputes between the parties get resolved or are
set to an amicable solution without the intervention of the judicial institution.

Concept of alternative dispute resolution 

ADR can be used to settle a variety of issues, including civil, criminal, commercial, family, and industrial
disputes. Where the parties do not want to resolve their dispute in the courts yet want to settle it, ADR may
help them in resolving their dispute and finding a solution. It is an optional method of resolving disputes
apart from the traditional methods. In ADR, a third party is used for solving the disputes between the parties,
this third party helps the parties in having a good conversation, which may result in a successful resolution

1
of the issues in a better way. The party also helps in discussing the differences arising between the opinions
of the parties. It helps the individuals or the groups in solving the dispute while maintaining law and order
with each other’s cooperation. 

As we can see in daily updates of courts there are several pending cases before all the respected courts
which are taking years and years for being resolved. Here the ADR plays an important role in lowering the
burden of the judiciary. It includes various techniques for solving disputes, such as arbitration, conciliation,
negotiation, mediation, and Lok Adalat. 

ADR is also included in the Fundamental Rights under Article 14 and Article 21, which deals particularly
with equality before the law and the right to life and liberty respectively. The motive of ADR is to give
social, economic, and political justice and to maintain the integrity which has been mentioned in the
preamble of the Constitution of India. Its main objective is to achieve free legal aid and justice to
economically backward people. Article 39A of the Constitution provides the provision of free legal aid to
poor people.

Recent developments
The ADR has been helping so many parties to resolve their disputes with the help of a third party, with the
help of the various means of ADR. Due to the pandemic from last year, the court system has made a big
revolution in its procedure of hearings. This revolution has been beneficial and helpful for so many but also
not as much beneficial for some. ADR saves time, money, mental and physical disturbance which usually
happens during court matters. ADR has been a big time-saver for all the parties as well as to the legal
system. As it helps the parties in dispute and provides them resolution without going to court. 

Virtual ADR
 The virtual ADR provides a hassle-free resolution to the parties and it doesn’t require any party or
attorney to travel from one place to another.
 Both parties can communicate with each other through video conferencing, which allows them both
to hear and see each other. 
 In the case of mediation, the mediator can easily communicate with parties separately using an easy
method and can come to an agreeable settlement. 
 Just like any new initiative faces so many challenges, virtual ADR will also face some
troubleshooting in starting. But it is certainly a step in a great and right direction. 
 ADR is now not an alternative platform for dispute resolution but it has become the first way to
resolve disputes in a speedy, fast, and cost-effective way. 

However, it should be noted that as ADR is hassle-free and one of the money and time-saving mechanisms it
also possesses some obstacles before it. It is not a big secret that lawyers have always been contrary to
technology. However, in times like these, it is the need of the hour to learn and adopt technology but it’s sort
of critical for some people as well as lawyers. It needs rigorous and continuous training for lawyers to transit
from offline to online mode. It is one of the hard tasks to provide an internet connection to all the courts of
India and some of the courts also have poor network issues. Adequate security protocols must be
implemented to ensure that sensitive data is not compromised or tampered with in any way. 

Impact of COVID-19 on the alternative dispute resolution 

In the present circumstances where the spread of Coronavirus (COVID-19) has put everything on hold, it is
important to address its impact on ADR.

COVID-19 has caused havoc on the global economy and corporate relationships, causing unprecedented
disruptions. A large number of commercial conflicts are arising as parties struggle to fulfil their contractual

2
obligations. Hence there is a great possibility that the crisis will increase litigation, delaying the resolution of
pending court cases, which will consequently result in more burden over the judiciary, and this way the
parties can steer towards ADR for a speedy resolution to the disputes raised. Hence because of this
pandemic,  virtual hearing in ADR has come into existence. 

Amendment of 2021
One of the recent amendments in the Arbitration and Conciliation Act, 1996 is Arbitration and Conciliation
(Amendment) Act 2021. This is the third time the Act of 1996 has been amended in the last six years,
indicating the legislative intent to amend the Act of 1996 and make India a more arbitration-friendly
country. The said amendment has made two major changes in the Act and those are: 

 The first is to allow automatic stay on  awards in some cases where the court has prima facie
evidence that the contract on which the award is based was tainted by “fraud” and “corruption.”
 The other major change in the Act of 1996 is the omission of the 8th schedule from the main Act. It
specifies the qualifications, experience, regulations, and norms that should be followed for accurate
mediation of arbitrators. 

2021 Amendment’s effects on India’s arbitration 

The impact of the automatic stay on awards 

The amendment made in Section 34 of the main Act is the most substantial change done to the provision of
Arbitration Awards in the Amendment Act of 2021. In the main statute in Section 34, it has been stated that
a party can file an application before the court for setting the arbitration award aside. Hence, after the
Amendment Act of 2015, it has been stated that an automatic stay would not be granted on the operation of
awards only after mere filing of an application for setting aside the award. Now the Amendment of 2021 has
introduced a material change by adding a provision under Section 36(3) so that the court can be assured that
if the prima facie evidence shows that the case is based on either the arbitration contract or the agreement
that forms the basis of the award, or that the award was formed or has been affected by fraud or corruption.
It should have to stay the award completely pending the disposal of the challenge. It has a retrospective
effect which will be deemed to effectuate from October 23 of 2015. 

In Parliament, the complete or unconditional stay has been criticized so many times during the introduction
of the Bill in the Lok Sabha. Various experts have pointed out that this unconditional stay on awards is like a
blanket stay that will plunge the efforts of India towards the pro-arbitration regime. Primarily this was said
because the party will easily lose to alleged corruption and the automatic stay in the enforcement of arbitral
awards. 

It has been also said that this will defeat the main purpose of alternate dispute mechanisms by bringing
parties to the courts and by making this prone to litigation. The other important concern with this
amendment is that the legislation does not define either corruption or fraud. It will automatically create an
ambiguous situation where the defendant party may suffer the rigid procedure of litigation even if the party
is right and it will also open the gate of courts for a high wave of litigations by overburdening the court
system. 

Expanding the scope of qualification of the arbitrators

This area includes two amendments, including the Amendment of 2019 which is interlinked with the
amendment of 2021. The amendment made in the original or main Act that added Section 43(j), stated the
qualification, eligibility, and norms for accreditation. The said section further directed the 8th schedule of
the Act, which provided an exhaustive list of qualifications for the persons who want to possess the position
of arbitrator. The schedule included the minimum requirements of a person having the educational
qualification at degree level including 10 years experience in technical or scientific stream. After the
3
professional level qualification, the said schedule also provided the general norms which would apply to an
arbitrator for reaching accreditation such as integrity, fairness, being impartial, neutral, etc. 

These qualifications and the general norms were broad that this section among the other things limited the
qualified foreign lawyer’s ability from acting as an arbitrator within India. It seemed like a significant hurdle
as compared to arbitration-friendly regions such as France etc. 

The 2021 Amendment has given substitution to Section 43(j) of the Act and also deleted the 8th schedule
from the main Act. It stated that the parties can appoint the arbitrator regardless of their qualifications. The
Lok Sabha appreciated the Bill by stating that it will attract eminent arbitrators from foreign countries and
will also add to making India a global hub of International Arbitration. 

Views of Justice Chandrachud – decentralization of justice

The honourable Justice Chandrachud has mentioned in one of the events organized on Online Dispute
Resolution (ODR) that the online hearings have made a great impact on the justice system in last year’s
virtual hearing. They have made the process even more efficient due to various simple changes in the
process such as the use of digital files by all the parties, the ability to make digital notes, and having all the
files in one place. The future of Arbitration in India.

India is a global powerhouse of the economy and in the interest of incorporating with the business
communities all over the globe, the laws of India have been always amended to keep up with the legal
regime of other leading commercial law jurisdictions. Arbitration being one of the methods of dispute
resolution has been there in working for a long time. The Arbitration and Conciliation Act, 1996 has been on
the line of the United Nations Commission on International Trade Law (UNCITRAL) for the framework of
the laws with the idea of modernization of Arbitration law in India, and for bringing it in a line with the
leading global practices and also for making India a global centre for arbitration. 

Even though arbitration has taken the first place over litigation due to its speedy and simple process. It
should be taken into account that most of the arbitration in India is ad hoc arbitration with institutional
arbitration being a minor proportion of all arbitration performed. Hence presently, India is lacking in having
institutions that can reach the level of some reputed nations institutions such as the International Court of
Arbitration (ICC), London Court of International Arbitration (LCIA), Singapore International Arbitration
Centre (SIAC), Hong Kong International Arbitration Centre (HKIAC), etc. Oftentimes it has been seen that
many companies making commercial transactions or contracts with India prefer foreign international
arbitration centres. 

Emergency arbitration

The concept of emergency arbitration provides emergency arbitrators who can be utilized when urgent relief
is needed and during the period of the pandemic, people used this provision. There has been uncertainty in
India regarding the enforceability of the emergency awards and the orders for arbitrations that have taken
place in India. The LCI (Law Commission of India) In Its 246th report has mentioned a recommendation by
recognizing the concept of the emergency arbitrator by widening the definition of the arbitral tribunal under
Section 2(d) of Arbitration and Conciliation Act for including emergency arbitrators. However, this
recommendation was not incorporated in the 2015 amendment Act. 

The said issue again came into the lead during the earlier widely disclosed dispute in Future Retails v.
Amazon, where the parties are Amazon, Future Group, and Reliance. In this Amazon managed to get the
interim order from the Emergency Arbitrator under the rules of SIAC. It restrained Future Group from
proceeding with a deal worth Rs. 24,700 crore for monetization of retail business. At that time the question
was raised about whether the passing of interim order is enforceable in India or not. 

4
Hence, Reliance stated its intention publicly to go ahead with the sale. Currently, the position of emergency
arbitration in India is that such orders of emergency arbitration cannot be passed against non-parties and the
orders passed by emergency arbitrators especially in cases where the arbitration took place outside India
cannot be enforced directly. However, except for only this limitation, the orders by emergency arbitrators
have been quite famous and useful. 

In this case, Future Retails argued that the order of Emergency Arbitrator is not valid in India. Because the
Arbitration and Conciliation Act doesn’t recognize Emergency Arbitrators. Hence the order given by EA
doesn’t comply with Section 17(1) of the Act, making it unenforceable under Section 17(2) of the said Act.
However, this point has been prosecuted before the High Court of Delhi, involving two different but
interlinked cases Future Retails v. Amazon and Amazon v. Future Coupons. The court after observing the
issues, the validity of the order/award given by EA, gave its decision in favour of recognizing emergency
arbitrators as legitimate arbitrators under Indian law. 

Conclusion
ADR is one of the most important legal institutions that will succeed greatly in the future. As time changes,
its form and mechanism are also developed in different ways to resolve disputes and make it easier for the
parties to the dispute. Different emerging provisions in ADR help in the improvement of its facets. The new
amendments have provided a broad framework and exposure to the mechanism of ADR so that the
procedure can take place effectively.