ALTERNATIVE DISPUTE RESOLUTION AND ITS SIGNIFICANCE

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INTRODUCTION

The Judicial system in India has strived to underpin the concept of ‘Justice delayed is justice denied.’ However currently, in India, about 3 crore cases are pending at different levels of courts. As per several reports, there are only 19 judges per 10 lakh people whereas the adequate ratio is 50 judges per 10 lakh people. Factors like corruption, incompetence, lack of judges and low quality of judiciary have contributed to a rise in the number of cases pending before the court.

With all these factors adversely affecting the judicial system, the subsistence of a speedy justice dispensing system is next to impossible. The right to a speedy trial is enshrined under Article 21 of the constitution.

Fast tracks courts have helped in settling millions of cases but still, the issue is far from being resolved.

Therefore, in an attempt to abate this burden of pending cases, the Alternative Dispute Resolution Mechanism also known as the ADR mechanism was introduced by the courts to provide speedy justice.

WHAT IS THE NEED FOR ADR MECHANISMS?

After the amendment of Section 89, of ‘The Code of Civil Procedure’ in 1999, the alternative dispute resolution (ADR) mechanisms namely arbitration, conciliation, mediation and pre-trial/judicial settlement methods including settlements in Lok Adalat were introduced.

Under section 89, the code of civil procedure lays down,

(1) Where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the Court may reformulate the terms of a possible settlement and refer the same for—

(a) Arbitration;

(b) Conciliation;

(c) Judicial settlement including settlement through Lok Adalat; or

(d) Mediation.

Thus, the aforementioned ADR mechanisms are useful to lift the burden of cases on the judiciary and to provide quick justice to the parties without having to follow the rather expensive and formal court proceedings.

WHAT ARE THE OBJECTIVES OF ALTERNATIVE DISPUTE RESOLUTION MECHANISMS?

According to Section 89 of CPC, it is clear that the court must refer a dispute to any one of the ADR mechanisms if it appears to the court that there exists a possibility of settlement. The objectives of ADR mechanisms are as follows:

  • To resolve disputes outside the court premises.
  • To promote quick settlements.
  • To save time and costs associated with a court proceeding.
  • To allow the parties to be able to find solutions themselves.

WHAT DISPUTES CAN BE SETTLED THROUGH ADR?

After the establishment of ADR mechanisms, the question arose as to which types of disputes can be referred for alternative dispute resolution.

For this purpose, the Supreme Court laid down guidelines about the kind of cases that would be eligible for ADR in Afcons Infrastructure Ltd. and Anr. V. Cherian Varkey Construction Co. Pvt. Ltd. and Ors,

Relationship disputes-

  • Disputes relating to matrimonial causes, maintenance, custody of children;
  • Disputes relating to partition/division among family members/co-partners/co-owners;
  • Disputes relating to a partnership among partners.
  • Disputes between neighbours (relating to encroachments, nuisance etc.;
  • Disputes between employers and employees;
  • Disputes among members of societies/associations/Apartment owners Associations;

Contracts and trade-related disputes-

  • Disputes arising out of contracts (including all money claims);
  • Disputes relating to specific performance;
  • Disputes between suppliers and customers;
  • Disputes between bankers and customers;
  • Disputes between developers/builders and customers;
  • Disputes between landlords and tenants/licensor and licensees;
  • Disputes between an insurer and insured;

Tortious liability disputes-

  • claims for compensation in motor accidents/other accidents;

All consumer disputes-

  • Including disputes where a trader/ supplier/ manufacturer/ service provider is keen to maintain his business/ professional reputation and credibility or product popularity.

WHAT DISPUTES CANNOT BE SETTLED THROUGH ADR?

The following nature of disputes are generally not considered to be suitable for the ADR process:

(i) Representative suits under Order 1 Rule 8 CPC which involve public interest or interest of numerous persons who are not parties before the court. (In fact, even a compromise in such a suit is a difficult process requiring notice to the persons interested in the suit, before its acceptance).

(ii) Disputes relating to election to public offices (as contrasted from disputes between two groups trying to get control over the management of societies, clubs, associations etc.).

(iii) Cases –

  • involving grant of authority by the court after enquiry, for example, suits for grant of probate or letters of administration.
  • involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion etc.
  • involving prosecution for criminal offences.
  •  requiring protection of courts, for example, claims against minors, deities and mentally challenged and suits for declaration of title against the government.

The four methods of alternative dispute resolution introduced in section 89 of CPC are explained hereafter:

 1. ARBITRATION

Arbitration is one of the modes of ADR mentioned in Section 89 of CPC and defined under Section 2 (1)(a) of Arbitration and Conciliation Act 1996.

 It is a process in which the parties choose a neutral third party known as the arbitrator to hear both sides and makes a decision. The arbitration proceedings take place outside the court but they are similar to a hearing wherein testimony and evidence may be presented by both parties. The decision made by an arbitrator after carefully examining both sides of the case is called an ‘award’ and is legally binding.

The provisions of the arbitration process are provided in The Arbitration and Conciliation Act 1996.

Which types of disputes are referred to for Arbitration?

Usually, all civil and Quasi civil court disputes involving private rights disputes can be arbitrated.

Rule 4 (ii) of Alternative Dispute Resolution Rules 2006 provides-

—that, where there is no relationship between the parties which requires to be preserved, it may be in the interest of the parties to seek reference of the matter of arbitration as envisaged in clause (a) of sub-section (1) of section 89;

Following are the nature of disputes that can be arbitrated: –

Disputes involving

  • contract interpretation and performance,
  • construction projects,
  • partnership differences,
  • real estate securities,
  • personal injury,
  • product liabilities,
  • professional liability,
  • intellectual property rights,
  • joint ventures,
  • insurance claim and
  • Banking & non-Banking transaction disputes

fall within the jurisdiction of Arbitration.

Disputes that cannot be arbitrated: –

Disputes involving

  • criminal offences,
  • Conjugal rights/matrimonial issues,
  • Guardianship,
  • Motor vehicle accident conversation,
  • testamentary issues under succession act,
  • issues falling under Indian Trust Act
  • tax-related matters

do not fall within the jurisdiction of Arbitration.

RECENT JUDGEMENTS ON ARBITRATION:

1. Kerala State Electricity Board and Anr. v. Kurien E. Kathilal

Referring the parties to arbitration has serious civil consequences procedurally and substantively. When there was no arbitration agreement between the parties, without a joint memo or a joint application of the parties, the High Court ought not to have referred the parties to arbitration, the Supreme Court held in this case.

2.  M/S Emaar MGF Land Limited & Anr. v. Aftab Singh

Upholding the NCDRC’s decision, the supreme court ruled that an Arbitration Clause in a Buyer’s Agreement cannot circumscribe the jurisdiction of a Consumer Fora, notwithstanding the amendments made to Section 8 of the Arbitration Act.

2. JUDICIAL SETTLEMENT/ LOK ADALAT

Judicial settlement is another ADR mechanism provided under section 89 of CPC. It is a process in which the parties in dispute reach a final settlement by way of compromise and such settlement is made under the supervision of a suitable institution or person to which the court has referred the dispute. Such institution or person/s are considered to be the Lok Adalat. The provisions for such proceedings are provided under the Legal Service Authority Act, 1987.


Which types of disputes are referred for judicial settlement?

Rule 4 (iv) of Alternative Dispute Resolution Rules 2006 provides-

 that, where parties are interested in a final settlement which may lead to a compromise, it will be in the interests of the parties to seek reference of the matter to the Lok Adalat or to judicial settlement as envisaged in clause (c) of sub-section (1) of section 89;

Following are the categories of disputes that can be referred to Lok Adalat:

Disputes involving-

  • civil cases,
  • matrimonial disputes,
  • MACT cases,
  • Mutation of land cases,
  • Compoundable criminal offences,
  • Family disputes,
  • Encroachment on forest lands,
  • Land acquisition disputes and
  • Cases that are not sub-judice

are mainly referred for Lok Adalat or judicial settlement.

CASE LAW- Balakrishna v. Member secretary Lok Adalat Jamkhandi, Bagalkot district

In this case, the petitioner claimed that the case was decided in his absence in the Lok Adalat. Subsequently, the court held that Lok Adalat can only decide the cases with the consent of both parties and an award cannot be passed by the Lok Adalat on merit. Lok Adalat cannot write a judgment after considering the pleadings of the parties. The basic purpose for approaching the Lok Adalat is to negotiate the matter between the parties and settle the same amicably with the consent of both parties. If any one of the parties is not present, Lok Adalat cannot decide the matter, as has been done in this case.

3. CONCILIATION

Conciliation is also an ADR mechanism that was introduced in section 89 of CPC. In this mechanism, an impartial third party also known as a conciliator is appointed to facilitate communication between parties and formulate or reformulate the terms of the settlement. Conciliation is very similar to arbitration yet different in the fact that the final decision is not legally binding on the parties. The Arbitration and Conciliation Act 1996, does not provide a proper definition of conciliation.

Which types of disputes are referred to for Conciliation?

Rule 4 (iii) of Alternative Dispute Resolution Rules 2006 provides-

 that, where there is a relationship between the parties which requires to be preserved, it may be in the interest of parties to seek reference of the matter to conciliation or mediation, as envisaged in clause (b) or (d) of sub-section (1) of section 89.

Also, the companies Act 2013, lays down the types of disputes that can be referred for mediation/ conciliation:

  • Under Section 442 of the Companies Act, 2013, disputes pending with the Central Government, NCLT or the NCLAT can be referred to mediation or conciliation.
  • Any matter which is pending before the Central Government, Tribunal or Appellate Tribunal under the Companies Act, 2013 can be referred for mediation either by the parties themselves or Suo moto by the Central Government.

Also read: PLEA BARGAINING

CASE LAWS

  1. Haresh Dayaram Thakur v. State of Maharashtra and Ors

The Bombay High Court ordered the over a flat to be taken up by conciliation and with the consent of the parties appointed Mr H Suresh as a conciliator between the parties. The parties agreed on the binding nature of the conciliation award and thereby, the proceedings were initiated. At the last session, the conciliator settled the matter in the favour of the petitioner, allotting the possession of the flat to the petitioner on the condition that the petitioner would give up all claims on an ancestral flat at R K Nagar.

The appellant challenged this settlement order of the conciliator in the High Court but the court rejected the plea on the grounds that the parties had agreed on the binding nature of the award and, thereby no remedy shall be available to them in respect of it. This decision of the High Court was challenged by the appellant in the Supreme Court.

 2. Mysore Cements Ltd. v. Svedala Barmac Ltd

It was said that Section 73 of the Act speaks of the Settlement Agreement.

In the present case, we do not find there any such formulation and reformulation by the Conciliator, under sub-section (1)

Sub-section (2), if the parties reach a settlement agreement of the dispute on the possible terms of settlement formulated, they may draw up and sign a written settlement agreement. As per Sub-section (3) when the parties sign the Settlement Agreement, it shall be final and binding on the parties and persons claiming under them respectively. Under Sub-section (4), the Conciliator shall authenticate the Settlement Agreement and furnish a copy thereof to each of the parties.

From the undisputed facts and looking at the records, it is clear that all the requirements of Section 73 are not complied with.

4.MEDIATION

Mediation is an ADR mechanism provided in section 89 of CPC along with arbitration, conciliation and judicial settlements.

It is a process through which a mediator is appointed either by the court or by the parties at dispute, and such a mediator facilitates discussion between parties either directly or by communicating with each other through the mediator. Mediation process resembles conciliation to a great extent but holds its difference in the fact that a mediator can only facilitate communication between the parties and cannot formulate or reformulate the terms of settlements, unlike a conciliator.

Which types of disputes can be mediated?

Rule 4 (iii) of Alternative Dispute Resolution Rules 2006 provides-

 that, where there is a relationship between the parties which requires to be preserved, it may be in the interest of parties to seek reference of the matter to conciliation or mediation, as envisaged in clause (b) or (d) of sub-section (1) of section 89.

According to the Companies (Mediation and Conciliation) Rules, 2016, the following disputes cannot be referred to mediation or conciliation, namely:

  • matters involving serious and specific allegations of fraud, fabrication of documents forgery, impersonation, coercion etc.
  • cases involving prosecution for criminal and non-compoundable offences.
  • disputes which involve public interest or interest of numerous persons who are not parties before the Central Government or the Tribunal or the Appellate Tribunal as the case may be.
  • matters relating to proceedings in respect of inspection or investigation
  • or the matters which relate to defaults or offences for which applications for compounding have been made by one or more parties.

RECENT DISPUTES THAT HAVE BEEN MEDIATED: –


1. Dispute between Mukesh and Anil Dhiru Bhai Ambani

One of the most famous cases settled through mediation in recent times is the one between Mukesh Ambani and Dhiru Bhai Ambaniover the takeover of South African Telecom Major MTN. This was a rather complex case that was successfully settled through mediation.


2. Glenmark Pharmaceuticals Limited v. Merck Sharp and Dohme Corporation and Anr 2015

In this case, a complicated patent dispute between the drug manufacturing companies Glenmark Pharmaceuticals and Merck Sharp and Dohme was resolved through mediation.


3. Perry Kansagra v. Smriti Madan Kansagra

The court referred this matrimonial and custody-related case for mediation after the parties expressed their will to attempt to reconcile their marriage. It was held that the daughter was happy to live with her mother and pay timely visitation to her father and grandparents. 

COMPARISON BETWEEN ARBITRATION, CONCILIATION, MEDIATION AND LOK ADALAT

ARBITRATIONCONCILIATIONMEDIATIONLOK ADALAT
Arbitration is a quasi-judicial adjudicatory process.Conciliation is a non-adjudicatory process.Mediation is a non-adjudicatory process.Lok Adalat is a non-adjudicatory process if it is established under sec 19 of Legal Services Authority Act,1987 and it is an adjudicatory and conciliatory process when it is established under sec 22 B of the said act.
Arbitrator is a neutral third party usually chosen by the parties to dispute.  Conciliator is a neutral third party.  Mediator also is a neutral third party.  Presiding officer is a neutral third party.  
The procedure and decision in arbitration are governed, restricted and controlled by the provisions of the Arbitration & Conciliation Act, 1996.  As per Section 74 of the Arbitration and Conciliation Act, 1996 the agreement is enforceable as it is a decree of the court in case of conciliation.  The referral court applies the principles of Order XXIII Rule 3, CPC for passing decree/order in terms of the agreement.  The award of Lok Adalat is considered as a decree of the Civil Court and is executable as per Section 21 of the Legal Services Authorities Act, 1987.  
An arbitrator decides the case and passes an award.A conciliator facilitates communication between parties and formulates or reformulates the terms of settlement.A mediator can only facilitate communication between the parties to arrive at a mutually agreeable settlement.The function of a presiding officer is persuasive.
Award is appealable on specified grounds.Not appealable.Not appealable.Award not appealable.
The award is binding on both parties.The agreement made through negotiation is not binding.The agreement between the parties is not binding.The award is binding on both parties.
The dispute is confidential.The dispute is confidential.The dispute is confidential.The dispute is not confidential.
No opportunity for parties to communicate directly.Parties communicate and negotiate in order to arrive at a mutual settlement.Parties communicate and negotiate to draw a mutual settlement.Limited scope for negotiation.
Does not involve payment of court fees.Does not involve payment of court fees.In case of court annexed mediation, the court fee already paid is refundable as per the Rules.No court fee is payable when a matter is filed in a Lok Adalat.
 Active participation or personal appearance of parties is not always required.Conciliation involves active participation of parties to dispute.In mediation, parties are actively and directly involved.Parties are not actively and directly involved in case of Lok Adalat
Consent of parties to dispute is required.To refer a case for conciliation the consent of the parties is mandatory.In case of mediation, the consent of the parties is not mandatory for referring a case to mediation.The consent of the parties is not mandatory to refer a case to Lok Adalat.

SIGNIFICANCE OF ADR MECHANISMS OVER LITIGATION?

The ADR mechanisms were introduced to lessen the burden of pending cases before the court. However, these mechanisms have several advantages which make them a good choice over litigation; Opting for ADR over a suit is cost-effective as it eliminates all the court fees and attorney charges. Also, ADR mechanisms provide faster resolutions. Court cases may take years but ADR can help in arriving at a decision in just a few sessions. In general,the legal system is adversarial which means it puts one side against the other and can worsen the relationships. On the other hand, ADR mechanisms like conciliation and mediation aim to promote communication between parties and finalize settlements agreeable to both parties. The formal setting of a court proceeding makes the parties uncomfortable and nervous whereas ADR processes are usually less formal as compared to a court proceeding. This ensures a sense of comfort and flexibility to the parties wherein both parties get to speak their side of the situation. Another benefit of opting for ADR processes is that they tend to follow simpler discovery and evidence rules which make the process quicker and easier. Finally, if the parties are unable to arrive at a solution through mediation, conciliation or Lok Adalat, the option to pursue litigation is always available.


REFERENCES-

Arbitration and Conciliation Act- http://www.bareactslive.com/ACA/ACT004.HTM

[1] Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. & Ors – Civil Appeal No.6000 of 2010

[2] Kerala State Electricity Board and Anr. v. Kurien E. Kathilal – Civil Appeal Nos.3164-3165 of 2017

[3] M/S Emaar MGF Land Limited & Anr. v. Aftab Singh – 2018 SCC Online SC 2771

[4] Haresh Dayaram Thakur v. State of Maharashtra and Ors, – AIR 2000 SC 2281

[5] Mysore Cements Ltd vs Svedala Barmac Ltd -12 March 2003, Civil Appeal 2321 of 2003

[6] Balakrishna v. Member secretary Lok Adalat Jamkhandi, Bagalkot district

https://www.barandbench.com/columns/50-landmark-decisions-on-arbitration-law-in-india-2018-2019-part-i

https://viamediationcentre.org/readnews/MTAyMQ==/What-kinds-of-matters-disputes-can-be-referred-to-mediation-conciliation-under-the-Companies-Mediation-and-Conciliation-Rules-2016

http://rcbajpai.com/doc/WhatDisputescanbesettledbyArbitration.pdf

https://bangaloremirror.indiatimes.com/opinion/others/talkinglegal-disputes-that-can-be-mediated/articleshow/70882410.cms

Author: Mehvish Mateen Patel, Chhatrapati Shivaji Maharaj University, Panvel.

Editor: Kanishka VaishSenior Editor, LexLife India

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