BENEFITS OF OPTING ALTERNATIVE DISPUTE RESOLUTION OVER LITIGATION

ABSTRACT :

Alternative Dispute Resolution (ADR) is a non- adversarial method for the settlement of disputes. The first part of this article talks about the basic concept of ADR and litigation, followed by a brief explanation of the mechanisms of ADR. The second part shows a comparison between ADR and litigation and highlights the benefits of opting ADR over litigation. Further, Indian legislations and case laws concerning ADR have been discussed along with the introduction of the concept of Lok Adalats.

Keywords: ADR, Arbitration, Litigation, Mechanism, Settlement.

THE CONCEPT OF ALTERNATIVE DISPUTE RESOLUTION :

Alternative Dispute Resolution (ADR) is a procedure for settling disputes by means other than litigation.[1] The settlement is done by an impartial third party, appointed by the disputants who mediates and resolves the matters between them. The dispute is settled without the Court’s interference.

Litigation includes the settlement of disputes between the parties in a Court of Law, wherein, the Court passes the final judgement after assessing the facts and merits of the case.

Mechanisms of Alternative Dispute Resolution :

  • Arbitration :

Arbitration can be described as a private and judicial determination of a dispute by an independent third party. The object is to obtain a fair resolution without delay and expense. It is conducted by either an individual arbitrator or an arbitral tribunal. The third party is appointed by the disputants through mutual consent.[2] After the arbitrator or the tribunal studies the case, an arbitral award is made which is final and binding on both the parties. An aggrieved party may take recourse to the court for setting aside the award on grounds specified in Section 34[3] of the Arbitration and Conciliation Act, 1996.[4]

  • Mediation :

A mediator is an impartial third party appointed by the disputants who helps them resolve a dispute mutually. He uses techniques and skills to open and improve dialogue between disputants, to reach an agreement with concrete effects. The agreements are usually non-binding. Mediation is completely confidential and at the discretion of the parties. The parties can still pursue litigation for settling the dispute if mediation proves to be inconclusive.[5]

  • Conciliation :

The parties consensually appoint a conciliator or multiple conciliators for the settlement of their dispute. Further, both the parties hand over the relevant documents and general information regarding their issues. If the conciliator finds an element of settlement, the terms of the settlement are drawn and sent to the disputants. If the parties agree with the terms and sign the agreement, it is final and binding on both the parties.[6]

  • Negotiation :

Negotiations do not involve the appointment of an impartial third party. However, the parties may choose to be represented by their attorneys during the negotiations. They work together to come to a compromise for their collective advantage.

ALTERNATIVE DISPUTE RESOLUTION V. LITIGATION :

  • Flexibility and Control :

In all the mechanisms of ADR, the power and control of all major decisions lie with the parties. The decisions and resolutions are sought only by mutual consent and agreement of the parties at every step. The date and time of the procedures also cater to the needs of the parties, whereas, in litigation, the parties have to comply with the courts in every single aspect.

  • Speed :

A litigation matter can take a very long time to conclude. The long list of pending cases in the Indian Courts is an example of the same. However, ADR provides the parties with a focussed, goal-oriented, and a well- structured approach to reach its culmination well in time.

  • Economically feasible :

Litigation can drain the pockets of the parties. The process includes the fees of the Court, the Counsel, the travelling expenses incurred by the individual, whereas, ADR is very economically sound as it eliminates all these extra costs.

  • Privacy and Confidentiality :

In India, any individual can attend courtroom proceedings irrespective of whether it is related to them or not. On the other hand, the process of ADR is entirely confidential and takes place within four walls, only in the presence of the parties and the intermediary. This keeps the reputation of the parties intact and leaves no room for the public to make assumptions about the dispute or nature of either of the parties.

  • Efficient and Effective :

The Courts are overburdened with cases and often cannot pay complete and undivided attention to the matter in front of them. However, ADR allows a focused administration of justice to the parties. This increases the efficiency of the system of ADR and makes it more effective.

  • Focuses more on the parties :

In litigation, numerous things are taken into consideration which sometimes result in a decision that is inconsistent with the interests of the parties, with Law being the main determining factor. However, in ADR, the amicable intention of the parties towards settlement is given prime importance. From the beginning of the deliberative process until the decision is made, these mechanisms facilitate the intention of the parties.

THE ARBITRATION AND CONCILIATION ACT, 1996 :

The Arbitration and Conciliation Act, 1996 (the Act)[7], contains provisions to deal with domestic and international arbitration. The object of this act is to form an effective system for arbitration. The Act is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration and the UNCITRAL Arbitration Rules 1976.[8] The Act consists of 4 parts that deal with Arbitration, Enforcement of Certain Foreign Awards, Conciliation, and Supplementary Provisions respectively.[9] Later, amendments were made, and The Act was introduced as The Arbitration and Conciliation (Amendment) Act, 2019, and passed on 18th July 2019.[10]

RELEVANT JUDICIAL PRONOUNCEMENTS :

In the case of Comed Chemicals Ltd. v. C.N. Ramchand[11], it was held that any commercial matter including an action in tort, arising out of or relating to a contract can be referred to arbitration. However, matrimonial, insolvency, anti-competition, commercial court matters, criminal proceedings, and employment contracts cannot be referred to arbitration. Disputes between director and company are arbitrable as there is no master-servant relationship.

In SBP & Co. v. Patel Engg Ltd.[12] the Supreme Court held that the nature of the power conferred on the Court under Section 11[13] of the Act is judicial and not administrative. Accordingly, if the parties approach the Court for the appointment of an arbitral tribunal, and the Chief Justice pronounces that he has jurisdiction to appoint an arbitrator and that there is an arbitration agreement between the parties or that there is a live and subsisting dispute to be referred to arbitration. The Court then constitutes the Tribunal as envisaged, this would be binding and the parties cannot re-agitate before the arbitral tribunal.

The Apex Court in TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd.[14] held that irrespective of where the ‘central management and control is exercised’ by a company, companies incorporated in India, cannot choose any foreign law for governing their arbitration, this would be against public policy. The Court said that “international commercial arbitration” meant arbitration between parties where at least one of them is incorporated in a country outside India. Where both companies are incorporated in India, it cannot be an international commercial arbitration.

LOK ADALATS IN INDIA :

Lok Adalat is a forum where matters pending in the Courts or at the pre-litigation stage are settled amicably through conciliation. Lok Adalats have been granted statutory status under the Legal Services Authorities Act, 1987[15]. Under The Act, the award made by the Lok Adalats is deemed to be a decree of a civil court and is binding on all parties. Hence, no appeal against such an award lies before any court. There are mainly three categories of Lok Adalats namely- National, Permanent, and Mobile Lok Adalat.[16]

ADR IN INDIA, CONCLUSION :

Adopting ADR as the means for the settlement of any dispute has many advantages, when compared to litigation and otherwise. Gradually, the Country is also coming at pace with the International realm of ADR, with the help of the specific laws and acts which have been formulated and amended for a smoother execution of the same.

REFERENCES :

  1. Sumeet Kachwaha and Dharmendra Rautray, Kachwaha & Partners, ARBITRATION IN INDIA: AN OVERVIEW, https://ipba.org/media/fck/files/Arbitration%20in%20India.pdf.
  2. The arbitration and conciliation act, 1996, http://legislative.gov.in/sites/default/files/A1996-26.pdf.
  3. American Arbitration Association, What Happens After the Arbitrator Issues an Award, https://www.adr.org/sites/default/files/document_repository/AAA229_After_Award_Issued.pdf.
  4. Avishikta Chattopadhyay, 13 Reasons Why ADR is better than Litigation, (August 5, 2019), https://www.legalbites.in/13-reasons-why-adr-is-better-than-litigation/.

[1] https://legal-dictionary.thefreedictionary.com/alternative+dispute+resolution.

[2] HR.com, What is Arbitration?,  https://www.mediate.com/articles/grant.cfm.

[3] The arbitration and conciliation act, 1996, Chapter VII, § 34, http://legislative.gov.in/sites/default/files/A1996-26.pdf.

[4]  Swati Duggal, Setting Aside Arbitral Award: Contemporary Scenario in India (Formatted on 16th March 2019) https://www.lawctopus.com/academike/arbitral-award-setting-aside/.

[5] Travis Peeler, Types of Alternative Dispute Resolution (ADR) (2019-04-11 20:11:21),  https://www.legalmatch.com/law-library/article/types-of-alternative-dispute-resolution-adr.html.

[6] Sujay Dixit, Alternate Dispute Resolution Mechanism, http://www.legalservicesindia.com/article/224/ADR-Mechanism-in-India.html.

[7] Supra note 3, http://legislative.gov.in/sites/default/files/A1996-26.pdf.

[8] Sumeet Kachwaha and Dharmendra Rautray, Kachwaha & Partners, ARBITRATION IN INDIA: AN OVERVIEW, https://ipba.org/media/fck/files/Arbitration%20in%20India.pdf.

[9] supra note 7.

[10]  Maneck Mulla and Jinal M. Shah, SalientFeatures Of The Arbitration And Conciliation (Amendment) Bill, 2019, 18 September 2019, https://www.mondaq.com/india/court-procedure/845782/salient-features-of-the-arbitration-and-conciliation-amendment-bill-2019.

[11] Comed Chemicals Ltd. v. C.N. Ramchand, 2008 (13) SCALE 17 (arbitration petition no. 17 of 2007) (India).

[12] SBP & Co. v. Patel Engg Ltd, (2005) 8 SCC 618 (India).

[13]Supra note 3 at 9, Chapter III, § 11 (India), http://legislative.gov.in/sites/default/files/A1996-26.pdf.

[14]TDM Infrastructure (P) Ltd. v. UE Development India (P) Ltd., 2008 (2) Arb LR 439 (SC).

[15] The Legal Services Authorities Act, 1987 (India), https://nalsa.gov.in/acts-rules.

[16] Lok Adalat, https://nalsa.gov.in/lok-adalat, services.

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