ROLE OF ALTERNATIVE DISPUTE RESOLUTION IN CONTRACT

SUBMITTED BY:

M. ABDUL MUJEEF

LLB COURSE

2023-2026

SEMESTER 1

SUBMITTED TO:

Dr. RASHMI.K. S

ALLIANCE SCHOOL OF LAW

ALLIANCE UNIVERSITY

BANGALORE – 562106

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 ROLE OF ALTERNATIVE DISPUTE RESOLUTION IN CONTRACT

M.ABDUL MUJEEF1

ABSTRACT:

Alternative dispute resolution in a contract refers to an independent third person helps people
to resolve their dispute. Alternative dispute resolution process does not include judicial
determinations, such as decisions made by court or tribunal. Dispute management is where
disputes are identified and managed early and affectively. ADR provisions under the Indian
contract act of 1872 states that the parties to a contract may agree to resolve their dispute
through arbitration instead of enforcing their rights through a court of law by virtue of section
28 of the Indian contract act, 1872. There are many disadvantages of ADR, some of them are,
if ADR is unsuccessful, it can delay the court proceedings. All parties to the dispute must
agree to using ADR. An ineffective third party can potentially hinder a resolution. It also
affects human rights in a manner which we cannot get a ruling on our legal rights, including
discrimination and human rights, in ADR process. In this project I am going to discuss the
legal problems faced by people by ADR, and its scope, objectives etc... going ahead of the
problem ADR even does not have the government support in our India. It is also lacking
infrastructure and credible arbitral institutions, even after 27 years of passing of arbitration
and conciliation act,1996 there are no enough ADR centers In India. But ADR is a bit
beneficial to individuals as ADR is usually less formal, less expensive, and less time-
consuming than a trial. ADR can also give people more opportunity to determine when and
how their disputes will be resolved. So I am going to discuss about the role of alternative
dispute resolution in detail in the project, With the research questions and the answers for the
questions in the further project and I will declare with my suggestions about the alternative
dispute resolution in the project.

KEYWORDS: Alternative dispute resolution, Disadvantages, human rights affected by

ADR.

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Student alliance school of law, alliance university.
 INDEX

CONTEXT PAGE NO.

INTRODUCTION 04

REVIEW LITERATURE 05

RESEARCH PROBLEM 05

RESEARCH OBJECTIVE 06

RESEARCH QUESTIONS 06

RESEARCH METHODOLOGY 06

HYPOTHESIS 06

CHAPTERS 06-15

ALTERNATIVE DISPUTE RESOLUTION 06

ADVANTAGES AND DISADVANTAGES 08

TYPES OF ADR 10

CASE LAWS RELATING TO THE ADR IN CONTRACTS 13

SUGGESTIONS AND RECOMMENDATIONS 16

BIBLIOGRAPHY 16

CONCLUSION 17

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 INTRODUCTION

Alternative dispute resolution (ADR) is designed to settle disputes outside of the courtroom
with the help of an impartial third party. This ADR is used by the parties when the problem
between them is not resolvable and the issue fails and reaches an impasse. In today’s era
ADR is playing an important role in solving the disputes of many people in quick time.

From the statistics received from the Integrated Case Management Information System
(ICMIS) till January 27 2023, there are 208 cases pending in the supreme court of India for
more than 20 years. This case has come to notice of the people due to the court system of
India and the cases still pending in the apex court are very problematic for the public for
many reasons. To look after all those problems behalf of the court there is method that has
been established outside the court to look after the situations mutually by the parties in a
peaceful manner, this procedure of solving the cases outside the court is known as the
alternative dispute resolution.

Disputes are unavoidable element of human interaction and society needs to develop
constructive and creative solutions to solve them. RICHARD.E. MILLER and AUSTIN
SARAT in their article said that “disputes are not discrete events like births and deaths”. The
disputes that arrive at the court can be seen as the survivors of a long and exhausting process.

The articles regarding the alternative dispute resolution are mentioned below;

ARTICLE 21: it states that “no person shall be deprived of his life or his personal liberty
except according to procedure established by law”

ARTICLE 39-A: it obliges the state to ensure that the operation of a legal system that
promotes justice on the basis of equal opportunities and in particular grants free legal
assistance through appropriate legislations or schemes.2

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Alternative dispute resolution by D.R. S.C. TRIPATHI page no.13.
 REVIEW LITERATURE

Books related to the ADR in contract law were referred are mentioned below:

 Alternative Dispute Resolution (ADR) by DR.S.C. TRIPATHI:

According to DR.S.C. TRIPATHI (2018 edition) page no.6
says Alternative Dispute Resolution is a comprehensive study on different dispute
resolution mechanisms that are viable alternative to the courts.

 Arbitration and conciliation by MADHUSUDAN SAHARAY:

According to MADHUSUDAN SAHARAY (4 th edition)
page no.3-6 it is arbitration in disputes arising out of a legal relationship, whether
contractual or not and where one party is a national of another country.

 Law relating to arbitration conciliation in India by D.R.N.V. PARANJAPE:

According to D.R. N.V. PARANJAPE (2020 edition) page
no.5 a conciliator is a neutral third party appointed to assist parties in resolving their
disputes through the process of conciliation.

RESEARCH PROBLEM

The alternative dispute resolution plays a significant role in solving the toughest cases as
soon as possible. This is also a easiest way to dissolve the cases which are pending in the
high court and supreme court outside the court of law. Even there are many problems relating
to the alternative dispute resolution in the Indian economy. What are the steps taken by the
Indian government to resolve the problems of this alternative dispute resolution in the
modern days of the society. ADR the major problem-solving technique outside the court of
law in behalf of the high court and supreme court.3

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Arbitration and conciliation by D.R. MADHUSUDAN SAHARAY page no. 07-12.
 RESEARCH OBJECTIVE

 To know about the concept of alternative dispute revolution.

 To know the types of Alternative dispute revolution.
 To know the advantages and disadvantages of Alternative dispute revolution.
 To know why ADR concept is important in contracts.4

RESEARCH QUESTIONS

 How does the concept of ADR take place in contracts?

 How is Alternative dispute resolution essential in helping the high court and supreme
court in solving the cases?
 What is the role played by the Alternative dispute resolution in the contract law?
 What are the various types in which the Alternative dispute resolution can be solved?

RESEARCH METHODOLOGY

A doctrinal research methodology was used in this paper and alternative dispute resolution
books were referred along with the articles and journals relating to the alternative dispute
resolution from the web were also referred for completion of the research project.

HYPOTHESIS

In my point of view alternative dispute resolution has a wide area of simplicity in solving the
cases outside the courtroom. This has been achieved in a better manner in all parts of the
society. According to my view it is better achieved even in many companies.

CHAPTER 1

ALTERNATIVE DISPUTE REVOLUTION

The alternative dispute resolution can be defined as a technique of dispute resolution through
the intervention of a third party whose decision is not legally binding on the parties.

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Arbitration and conciliation by D.R. MADHUSUDAN SAHARAY page no. 7 -12.
 The term ‘alternative dispute resolution’ includes, only those processes in which the decision
finally arrived at is with the consent of the parties, namely negotiation, mediation and
conciliation in which the parties retain their freedom to decide the outcome of their disputes.

Arbitration contemplates an imposed decision. As arbitration process settles the disputes

outside the courts it is considered as ADR, as it brings the parties to the negotiating table,
identifying problems, establishing facts, clarifying issues, developing the option of settlement
and ultimately solving the disputes through award which is binding on the parties.

The well-known and oldest ADR techniques are arbitration and conciliation/mediation. Other
ADR techniques, though widely practiced in the USA and other countries for over 20 years,
are almost unknown in India.

A method of dispute resolution would be considered as a real alternative only if it can

dispense with the adjudicatory process, even if it is not wholly a consensual process. it may
be worked by a neutral third person who may bring the gap between the parties by bringing
them together through a process of conciliation, mediation or negotiation.5

Alternative dispute resolution (ADR) refers to the different ways people can resolve disputes
without a trial. The ADR processes are generally confidential, less formal, and less stressful
than traditional court proceedings. It gives parties a flexible and cooperative method to arrive
at agreements that are agreeable to both parties.

The primary criticism of ADR is situations where one party has more power than the other
which can result in an unfair negotiation process and outcome. The power imbalance can lead
to coercion, intimidation, or the disadvantaged party feeling compelled to accept unfavorable
terms. This undermines the principle of fairness, equality, and informed consent, which are
crucial for a just resolution of disputes.

The ADR process has helped the high court and the supreme court in solving the tough and
the toughest cases in an easy manner. The delay in delivery of justice was the biggest
challenge before the Indian judicial system. But after the evolution of ADR methods, the
amicable settlement of disputes became possible without the intervention of court.

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Alternative dispute resolution by D.R. S.C. TRIPATHI page no. 14 and 15.
It enabled speedy justice to the society. It also helped the judiciary by reducing its burden.
The main limitation of the courts is “justice delayed is justice denied”. This is main problem
in the Indian judicial system.

There are many developments undertaken in our Indian judicial system to make the decisions
much faster.6 but even then, there are many pending cases in our high court and the supreme
court. To solve this problem alternative dispute resolution can be very much essential. This
ADR gives an amendable settlement which is beneficial to both the parties without any
disputes among them. This ADR can solve all types of cases like civil, commercial, family
etc.… the ADR procedures are broader which can help both the parties to know each other’s
position and standards.

By solving the cases of civil, commercial, family etc.… by ADR it can help the high courts
and the supreme courts in completion of the cases in an easy manner and the court time can
be saved for the main and important cases.

CHAPTER 2

ADVANTAGES AND DISADVANTAGES OF ADR

ADVANTAGES: -

 Lower cost ADR tends to be lower in cost than litigation.

 Avoids a jury(i.e.) it involves one or more knowledgeable professionals to resolve the
problem.
 Privacy(i.e.) ADR is a private process whereas litigation and court records are open to
public. The results in ADR can be kept very confidential.
 ADR is speedy(i.e.) in court it takes more time but the ADR techniques help to
resolve the dispute in a very short period.
 Less stress(i.e.) ADR is less stressful than the expensive and lengthy litigation
process. many of the people are very much satisfied by the decisions of the ADR.

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Alternative dispute resolution: a garland of diverse mechanisms by VARENYA page no. 1 – 8.
  Co-operation(i.e.) ADR allows the party to work together with the help of the third
party appointed who is independent and neutral.
 The parties can often select their own arbitrator, mediator, conciliator to solve their
disputes.

DISADVANTAGES: -

 There is no guaranteed resolution with the exception of arbitration.

 Discovery limitations(i.e.) there is some sort of protection or safe guard to the party
in court but this facility is not available in the ADR process.
 ADR cannot be applicable to all types of cases.
 Facts may not be disclosed(i.e.) there is no proper submission of the evidence in the
arbitration process as in the litigation side. And it may lead to wrong decisions.7

Alternative dispute resolution is a number of disparate processes used by companies to

resolve claims and contractual disputes. This way is generally used when the efforts between
the client and the insurer to resolve any difference s between themselves fails and reaches an
impasse.

This ADR process is used to avoid expensive and time-consuming litigation and arbitration.
These outcomes may be non-binding and advisory in nature or enforceable without the right
to appeal.

The process of ADR is not advised in the situations of criminal law or situations where one
party has excessive power over the other party. Insured clients who are denied a claim are
offered this course of action as a form of recourse.8

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7
Alternative dispute resolution by D.R. S.C. TRIPATHI page no. 20 and 21.
8
Alternative dispute resolution by D.R. S.C. TRIPATHI page no. 27-31.
Alternative dispute resolution by DANIEL LIBERTO page no 3,4,5,6.
 CHAPTER 3

TYPES OF ALTERNATIVE DISPUTE REVOLUTION

 ARBITRATION: -

In arbitration a neutral person is called as an “arbitrator”. He hears

arguments and evidence from each side and then decides the outcome of the dispute.
Arbitration is less formal than the trial and the rules of evidence are often relaxed. Arbitration
may be either “binding” or “non-binding”. Binding arbitration means that the parties waive
their right to a trial and agree to accept the arbitrator’s decision as final. Generally, there is no
right to appeal an arbitrator’s decision.

 MEDIATION: -

In mediation an impartial person called a “mediator” helps the

parties try to reach a mutually acceptable resolution of the dispute.it helps the litigants to
resolve their disputes voluntarily and amicably with the assistance of a third party known as
“mediator”. The mediator by his skills assists the parties to settle their disputes. Mediation
utilizes organized communication and negotiation where parties put their issues and solution
for them before each other win the assistance of mediator. The mediator person can be
anyone the parties have chosen, or an ADR lawyer concurred on by the parties.

 NEUTRAL EVALUATION: -

In neutral evaluation, each party gets a chance to

present the case to a neutral person called an “evaluator”. It is a dispute resolution technique-
at mid-point between mediation and binding jurisdiction. The way it works is that parties in
dispute appoint an independent evaluator to assess the strengths and weaknesses of each
side’s case. This neutral, expert viewpoint is then intended to form a starting point for
negotiations to settle the disagreements. It goes through 4 distinct phases they are planning,
implementation, completion, and reporting.9

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 SETTLEMENT CONFERENCES: -
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Alternative dispute resolution by D.R. S.C. TRIPATHI page no.14,15,16.
 A settlement conference is a meeting between
the parties (and counsel, if represented) during which the parties attempt to settle issues
and avoid trail. As per the section 30 of the arbitration and conciliation act, the arbitral
tribunal may use any method of dispute resolution like mediation, conciliation or
negotiation to bring a settlement between the parties.

A volunteer judge pro tempore presides over a

settlement conference. A judge pro tempore is a neutral attorney who is court appointed
to perform specific duties for the courts based on his or her experience and qualifications.

 CONCILIATION: -

Conciliation is an ADR process where an independent third

party, the conciliator, helps people in a dispute to identify the disputed to identify the
disputed issues, develop options, consider alternatives and try to reach an agreement. It is
a voluntary process in which a professional facilitator assists employers and employees to
resolve disputes when their own unassisted efforts have not succeeded.

 PARTNERING: -

Partnering is a collaborative, non-binding process that focusses on

cooperative solving of problems that participants have in common. It yields reconciliation
(win-win) as opposed to each either compromise (lose-lose) or concession (win-lose). It is
based on periodical meetings during implementation of project; often on presence of a
neutral facilitator. .10

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 EVALUATION: -

10
Alternative dispute resolution by D.R. S.C. TRIPATHI page no. 13,14,15.
Arbitration and conciliation by D.R. MADHUSUDAN SAHARAY page no. 16-23.
 Evaluation is a non-binding assessment of the dispute, the viability of
proposed settlements terms, or to any other aspect of a dispute.11

 CLAIMS APPEAL COMMITTEE: -

In this process, in any undertaking, a dispute

which was not resolved at lower level, will be resolved by a committee or board of senior
executives who normally are not directly involved in the matter of dispute.

 FACILITATION: -

Facilitation is the assistance provided to the parties to a dispute by a

third party, usually neutral, to help them to deal constructively with the issues between
them.

 FAST-TRACK ARBITRATION: -

Fast-track arbitration is a form of arbitration in

which the settlement of dispute by an arbitration process is rendered in a short-time and at
reduced cost.

 COURT-ANNEXED ARBITRATION: -

It is a form of arbitration by a court-approved

neutral. In this model, the neutral’s findings is initially non-binding, but it will become
binding if neither party seeks a rehearsing by a judge.12

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CHAPTER 4

11
Alternative dispute resolution by D.R. S.C. TRIPATHI page no. 13,14,15.
Arbitration and conciliation by D.R. MADHUSUDAN SAHARAY page no. 16-23.
12
Alternative dispute resolution by D.R. SUKUMAR RAY page no. 13- 17.
 CASE LAWS RELATING TO THE ADR IN CONTRACTS

 SHAPOORJI PALLONJI & CO. VS RATTAN INDIAN POWER:

FACTS:
Bids were invited for the performance of civil work related to boilers by
Indiabulls. The contract was given to Shapoorji on behalf of Elena but the letterhead
was issued by indiabulls. The issue that arose before the court was whether, on
invocation of the arbitration clause, the third party to the case (indiabulls) can be invited
to such arbitration proceedings or not.
JUDGEMENT:
It was held that a third party to the arbitration agreement can be made a party
to such agreement based on the doctrine of group of companies. Firstly, affiliation with
the parent company where a direct relationship exists with the signatory company;
secondly, where the subject matter is also applicable to this company; and thirdly, the
party is involved in the disputed transaction.
The court cited various judgements to conclude that where a non-binding
party to the arbitration agreement notifies and takes part in policy decisions with relation
to the conflict, such parties can be made a part of the arbitration agreement.

 DLF HOME DEVELOPERS LTD. VS RAJPURA HOMES PVT.LTD.:

FACTS:
DHDL and Ridgewood holdings ltd. Invested in a joint venture to construct and
maintain properties which was later sold to a company in Mauritius. DHDL filed two
petitions to invoke arbitration under the agreements. The respondents claimed that
arbitration could be invoked through the agreement for sale, but not from that on
construction. The issue before the court was of collusion of both these arbitration
clauses.13
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JUDGEMENT:

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Arbitration in India landmark judgements by NIHIT NAGPAL and DEVIKA MEHRA page no. 1-7.
 The court held that since the parties had agreed to the completion of the
process of purchase, no dispute can arise out of this agreement, but since the arbitration
clause from the construction agreement stands valid, the seat of arbitration should be decided
from it. Further, the merging of both the arbitration clauses was left to the appointed
arbitrator.

The decision outlined the power of high courts under section 11 of the
arbitration and conciliation act,1996. They are powers of review, where the court is
empowered to decide the right course of action thoroughly examining the material facts of the
conflict. The powers of the court are not merely restricted to redirecting the case to the
arbitral tribunals, they need to give due consideration to the arbitrability of the matter and
further authorize parties to pursue arbitration. This becomes relevant after the 2015
amendment which tends to reduce judicial interference.

 LAXMI CONTINENTAL CONSTRUCTION VS STATE OF U.P:

FACTS:
A chief engineer not related to the construction was appointed as a sole
arbitrator according to terms agreed upon by both parties. The arbitration was delayed
for a significant period, when the final date came in 1996. The arbitrator ceased to be a
central government employee in 1995 owing to retirement conditions for appointment of
the arbitrator were very specific. Whether such arbitrator can continue to perform his
roles even after retirement? It was the virtue of his post that had brought the
responsibility of appointment as an arbitrator to him. The issue was whether his mandate
had ended, or whether the continuance of his exercise of power amounted to
misconduct?

JUDGEMENT:
The arbitrator at the time of appointment qualified under certain conditions and
can remain to arbitrate unless he is disqualified by statutory provisions.14

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Alternative dispute resolution by D.R. S.C. TRIPATHI page no 37-45.
Arbitration in India landmark judgements by NIHIT NAGPAL and DEVIKA MEHRA page 1-9.
While relying on a precedent the apex court held that his authority as the sole arbitrator will
not come to an end on his retirement. He is still empowered and qualified within the
arbitration clause to declare awards. On the question of misconduct by the arbitrator, the
court said that the arbitrator had acted on the orders of the civil judge to pass an award within
a month. Hence, he was not liable for misconduct as he was acting an order of the court.

 AMAZON.COM NV INVESTMENT HOLDINGS LLC VS FUTURE RETAIL

LIMITED:

FACTS:
This case pertained to the power of the court to review and decide an appeal on
an emergency arbitral award under sections 17(1) and 17(2) of the arbitration act; and
whether an emergency arbitral award is appealable or qualifies as an order within the
scope of section 17?

JUDGEMENT:
The supreme court observed that the appointment of an emergency arbitrator
is within the rules of SIAC and mandated by the statutory provisions of India. The court
further clarified that an emergency arbitrator is well within the ambit of the meaning of
arbitral tribunal. The supreme court suggested that an emergency arbitral award is acting
to the order passed by an arbitral tribunal.

This emergency award qualifies under the standards of an order under

section 17 of the act and is enforceable as a decree. Appeals against an interim order for
relief will render the object of arbitration futile. In furtherance of expeditious settlement,
the apex court declared emergency awards as orders which can be enforced by the high
courts but material consideration is not to be appealed there.15

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Arbitration and conciliation by AVTAR SINGH page no. 213-247.
Arbitration in India landmark judgements by NIHIT NAGPAL and DEVIKA MEHRA page no. 7-10.
 SUGGESTIONS AND RECOMMENDATIONS

The process of alternative dispute revolution helps the economy and the courts of the
Indian judicial system (i.e.) supreme court and high court in solving the pending cases
and the small cases and help the supreme court and high court in deal with the big and
unsolvable cases. There are equal advantages and disadvantages of Alternative dispute
resolution in the contracts. This is the easiest way to solve the cases outside the
courtroom with the help of a third party which can be beneficial to both the parties.

This is a easy way to resolve the claims and contractual disputes in a company. we can
use an ADR scheme to narrow down the problem before we go to court. By using this
process in solving the disputes we can save time, it is more flexible, it is cheaper, and it
is less stressful. my recommendation would be, still this ADR process is not followed in
many places. If we start following this ADR process then the burden of the courts will
reduce to some point.

BIBILIOGRAOHY

 Alternative dispute resolution by D.R. S.C. TRIPATHI.

 Arbitration and conciliation by MADHUSUDAN SAHARY.
 Law relating to arbitration and conciliation In India by D.R. N.V. PARANJAPE.
 Alternative dispute resolution by D.R. SUKUMAR RAY.
 Alternative dispute resolution: a garland of diverse mechanisms by VARENYA.
 Alternative dispute resolution by DANIEL LIBERTO.
 Arbitration in India landmark judgements by NIHIT NAGPAL and DEVIKA MEHRA.
 Arbitration and conciliation by AVTAR SINGH.

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 CONCLUSION

Alternative dispute resolution is a less painful method of dealing with conflicts that
occur within small business partnerships. Conflict is inevitable when it comes to owing
an establishment, especially when there is lack of communication and planning strategy.
Alternative dispute revolution can assist in keeping the business intact by being fair
(neutral mediator), cost efficient, and fast while generating terms that both parties agree
with.

There are many other dispute resolution methods like med-arb, mini trial, summary jury
trail etc. but arbitration, mediation, and Lok Adalat etc. are the most commonly used
techniques of alternative dispute revolution in India. Throughout the world, alternative
dispute revolution has been slowly becoming the favored choice for parties but India
still relies a lot on litigation. However, with the development of these alternative dispute
revolution methods and in an effort to improve access to justice. Alternative dispute
revolution is being seen as a necessity legal recognition should be given to all
alternative dispute revolution methods including negotiation as they are viable and
convenient and it would help to ease the burden of the courts.

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