ADR: Why is it still the Second Choice?



The Indian judiciary is one of the world's oldest judicial systems, but it has grown ineffective in resolving disputes despite creating many fast-track courts. Thousands of cases are clogging the Indian courts, and the situation is far from better as the cases continue to pile up. The reason is not just the courts' inability to resolve disputes in a reasonable amount of time, but also that petty concerns that may be resolved outside of the courts are brought before the courts.


Arbitration, mediation, or negotiation are examples of Alternative Dispute Resolution (ADR) procedures for resolving conflicts without resorting to litigation. ADR processes are usually less expensive and faster. They are increasingly being used in high-profile labour conflicts, divorce lawsuits, and personal injury claims that might otherwise result in litigation.


Terms to Know

Arbitration: A process akin to an informal trial in which an impartial third party hears both sides of a dispute and renders a decision; the parties can choose whether the result is binding or non-binding.

Mediation: A collaborative procedure in which a mediator works with the parties to reach an amicable agreement; mediation is often non-binding.

Conciliation is the process of achieving an amicable resolution between the parties to a dispute by appointing a conciliator to meet with each party separately to discuss their differences.

Lok Adalat: It is the "People's Court," chaired by a sitting or retired judicial officer, social activist, or members of the legal profession. The National Legal Service Authority (NALSA) and other Legal Services Institutions hold Lok Adalats at regular intervals to exercise such jurisdiction.


Important Provisions Related to ADR

If it appears to the court that there are chances of settlement outside the court, the court may formulate the parameters of the probable settlement and refers it to Arbitration, Conciliation, Mediation, or Lok Adalat. People have that opportunity under Section 89 of the Civil Procedure Code, 1908.

The Arbitration and Conciliation Act of 1996 and the Legal Services Authority Act of 1987 deal with Alternative Dispute Resolution.


Legislations of ADR in India

Code of Civil Procedure: Sections 312-325 of the Code of Civil Procedure, 1859, dealt with the arbitration in lawsuits, whereas sections 326 & 327 provided arbitration without the court's intervention. The Act of 1882 was repealed by the Code of Civil Procedure (Act 5 of 1908) in 1908. Section 89 of the Code of Civil Procedure, enacted in 1908, mandates that cases be encouraged to seek ADR. The courts are obligated under the First Schedule, Order XXXII A, Rule 3 to help the parties settle on the subject matter of the dispute in the first instance.


Indian Arbitration Act, 1899: This Act was primarily based on the 1889 British Arbitration Act. It broadened the scope of arbitration by defining "submission" as "a written agreement to submit current and future conflicts to arbitration, whether or not an arbitrator is specified therein."


Arbitration (Protocol And Convention) Act 1937: It implemented the Geneva Protocol on Arbitration Clauses, 1923 and the Geneva Convention on the Execution of Foreign Arbitral Awards, 1927, in India. The purpose of this Act was to give effect to the protocol and enable the convention to take force in India.


The Arbitration Act, 1940: Only domestic arbitration was covered by the 1940 Arbitration Act. Court's intervention was necessary by the 1940 Act in all three stages of arbitration in the tribunal before the dispute was referred, during the proceedings, and after the award.

This Act established three types of arbitration:

  1. Arbitration without the court's intervention;

  2. Arbitration in suits (i.e. arbitration with court intervention in pending suits); and

  3. Arbitration with the court's intervention in circumstances where there is no suit pending.


Arbitration & Conciliation Act, 1996: To modernise the 1940 Act, the government enacted the Arbitration and Conciliation Act of 1996. The United Nations Commission on International Trade Law Secretariat, the Asian African Legal Consultative Committee, the International Council for Commercial Arbitration, and the International Chamber of Commerce met for a consultative meeting in 1978. All the participants agreed that it would be in the best interests of International Commercial Arbitration if UNCITRAL took steps to establish the International Council for Commercial Arbitration.

It applies to both domestic and international business arbitrations. It was a watershed moment in India's quest for a viable alternative to the adversarial legal system.


The Need for ADR

  1. Disputes are resolved amicably: ADR allows for a peaceful resolution of disagreements. In business, having a competition rather than a rival is a wise strategy. It is evident that healthy competition leads to improvement and influences the cost of services or commodities in all spheres.

  2. Time effectiveness: ADR enables trials to be completed quickly. In contrast to the litigation procedure, there is no possibility of an adjournment or stay order in ADR.

  3. Cost-effective dispute resolution: ADR requires very little money, unlike litigations, where large sums must be paid to the lawyers and other participants.

  4. Management that saves time: ADR is also known as dispute management because it allows a conflict to be settled without going through the lengthy traditional litigation process.

  5. Recognition by the law: The Indian statutes have accepted this system. For example, the Civil Procedure Code, Order 32A, Rule 3 allows for compromise, and the decree that results from it is not appealable. Section 12 of the Industrial Disputes Act of 1947 included provisions for conciliation as a prerequisite for any pressure tactics or collective bargaining.

  6. Multinational firms have arrived: Several global firms plan to invest and expand their operations in the country. These companies take a dynamic approach to their operations. As a result, in the event of a conflict, they should be supplied with a system that allows them to resolve their disagreement efficiently and without delay.


A Second Choice

Alternative Dispute Resolution is still seen as a viable alternative to litigation. It is only used when litigation appears to be the incorrect option and cannot be pursued due to time, cost, or inability to locate a skilled lawyer—further reiterating the earlier point that ADR, particularly arbitration, has evolved into a process similar to litigation. The process allows for a reduction in attorney costs, time, and other expenses by allowing parties to converse rather than relying on briefs, discovery, the never-ending reliance on testimonies and counter-testimonies.


However, much as they would before a judge, lawyers make repeated presentations of facts, offer more evidence, and file motions, encouraging clients to behave as they would in a courtroom, prolonging the arbitration process into a drawn-out conflict similar to litigation. Even after the arbitration procedure is complete and the arbitrator issues a decision, these decisions frequently go beyond the bounds of rationality, contracts, and even civil law. Parties can voluntarily choose different conflict resolution procedures, but it is not the only option for issues to be referred to arbitration, mediation, or conciliation.


The judiciary was given the power to refer cases to other dispute resolution processes to promote and support ADR. Though well-intentioned, this has resulted in courts directing cases to Alternative Dispute Resolution after litigation has already commenced, which frequently leads to parties and lawyers carrying their resentment and hostility from the legal battle into the dispute resolution process. Hence, ADR remains an "alternative" to litigation. As people not only lack awareness but also mimic the litigation process during peaceful means of dispute resolution because it is the only thing they are familiar with. The only way to reverse this is to promote ADR as a primary means of dispute resolution. It is slowly but steadily happening, and commercial arbitration may be the key to making it a primary method of dispute resolution.

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