Why Choose ADR over Litigation
The Indian Judiciary is burdened with and excessive backlog of cases, leading to prolonged litigation timelines. Alternative Dispute Resolution (ADR) mechanisms such as mediation and arbitration offer a viable solution by expediting the resolution process and reducing costs. Since ADR proceedings are typically concluded faster than litigation, parties can save both time and legal expenses.
Confidentiality is another crucial factor that makes ADR preferable. Unlike traditional court proceedings, which are generally public, arbitration and mediation offer privacy to the disputing parties. This is particularly advantageous for commercial disputes, where sensitive information must be protected.
Additionally, ADR allows for greater participation and flexibility. The disputing parties play and active role in negotiating terms in a setting that is less rigid and procedural compared to courtroom litigation. This ensures that the final resolution is mutually acceptable, thereby reducing the chances of future disputes.
Mechanism of Mediation in India
Mediation was first recognized in Indian legislation through the Industrial Disputes Act,1947, which mandated the appointment of conciliators to facilitate dispute resolution. A significant development came in 1999 when section 89 was introduced into the Code of Civil Procedure (CPC), allowing courts to refer disputes for ADR, including mediation. The enactment of the Mediation Act, 2023 further solidified the legal framework by defining mediation under Section 3(3)(h).
Judicial endorsement has played a crucial role in the growth of mediation in India. The landmark judgement in Salem Advocates Bar Association, Tamil Nadu v. Union of India emphasized the necessity of ADR, making it mandatory for courts to refer matters of mediation, conciliation, or arbitration before proceeding with litigation.
Mediation operates on a voluntary basis, allowing parties to withdraw if they feel a settlement cannot be reached. Since settlements are reached through mutual consensus, they are more likely to be honoured by the disputing parties.
Mechanism of Arbitration in India
Arbitration has deep roots in Indian history, dating back to the Vedic era. The Arbitration and Conciliation Act, 1996, which is based on the UNOCTRAL Model Law, governs arbitration proceedings in India. The Act classifies arbitration proceeding in India. The Act classifies arbitration into different categories, with institutional arbitration, fast-track arbitration, and ad hoc arbitration being the most prominent.
Currently, India has around 35 arbitral institutions catering to domestic and international disputes, as well as those involving public sector undertakings and trade associations. These institutions either function under their own procedural rules or follow the framework provided by the Arbitration and Conciliation Act, 1996.
The Act has undergone multiple amendments, with the latest in 2021, which broadened it’s scope to include international commercial arbitration even if the arbitration seat is outside India. The amendment also introduced a fast-track procedure, ensuring an award is delivered within 6 months. Furthermore, it limited judicial intervention by allowing courts only to examine the validity of an arbitration agreement.
A significant development in 2024 was the establishment of the Arbitration Bar of India (ABI), a professional body dedicated to enhancing ADR in the country. ABI works in collaboration with stakeholders, government agencies, and policy makers to advance arbitration practices in India. It offers three membership categories: members, associate members, and honorary members.
India’s rise as a global economic hub has led to an increase in arbitration cases involving Indian parties. With a pro-arbitration stance from the judiciary, there has been minimal interference in arbitral awards, expediated enforcement of foreign arbitral decisions, and recognition of emergency arbitrations. These reforms have contributed to making arbitration a more reliable and preferred dispute resolution mechanism.
Notable Arbitration Case Laws
a- Konkan Railway Corpn. Ltd. And Ors. v. Mehul Construction Co.
This case reaffirmed the limited scope of judicial intervention in arbitration proceedings. The Supreme Court emphasized that the objective of replacing the Arbitration Act of !940 with the Arbitration and Conciliation Act, 1996, was to reducejudicial interference and promote arbitration as a self-sufficient dispute resolution mechanism.
b- S.B.P. & Co. v. Patel Engineering and Anr.
The court ruled that the Chief Justice’s authority under section 11(6) to appoint arbitrators is a judicial function rather than an administrative one. This requires the Chief Justice to assess the existence and validity of an arbitration agreement before making appointments.
c- ONGC v. Saw Pipes
The Supreme Court controversially intervened in an arbitral award, sparking debate over the extent to which courts can scrutinize arbitration decisions. Critics argued that the judgement could lead to excessive judicial interference, undermining the autonomy of arbitration proceedings.
Shortcomings of Mediation in India
i). Issues with section 89 of CPC
Section 89 mandates judges to draft settlement terms before referring cases to ADR, which contradicts the essence of mediation. Mediation intended to be voluntary process driven by the parties themselves, rather than court imposed settlements. This procedural flaw undermines the effectiveness of mediation.
Additionally, this section incorrectly distinguishes between mediation and conciliation, despite these terms being used interchangeably worldwide. The Law commission argued that conciliators play a more active role, but this distinction is largely artificial and unnecessary.
ii). Concerns with Section 28 of Mediation Act, 2023
This provision allows mediated agreements to be challenged only on grounds such as fraud, corruption and impersonation but excludes coercion and duress. Additionally, non- signatories lack the right to challenge an agreement, raising concerns about fairness and enforceability.
Unlike the Bar Council of India, which includes experienced legal professional’s the Mediation Council of India lacks adequate representation from seasoned mediators. Furthermore, it’s dependence on the central government for the regulatory approvals raise questions about it’s neutrality.
Shortcomings of Arbitration in India
Although arbitration was intended to be cost-effective and efficient, it often mirrors litigation due to excessive procedural formalities. Many lawyers involved in arbitration come from a litigation background and tend to follow lengthy, trial-like processes, making arbitration more expensive and adversarial than it should be.
Another significant challenge is the frequent delays in enforcing arbitral awards. These awards are often subject to judicial scrutiny, which can lead to prolonged legal battles. Moreover, parties frequently neglect to specify arbitration terms clearly in their contracts leading to procedural ambiguities and disputes over arbitrator selection.
Conclusion
Arbitration and mediation have emerged as effective ADR mechanisms in India, reducing litigation burdens and offering quicker and cost-effective dispute resolution. While legislative advancements and judicial support have strengthened ADR frameworks, challenges such as excessive procedural delays, judicial intervention and regulatory concerns still exist.
Addressing these issues through legal reforms, improved institutional frameworks and better drafting of dispute resolution agreements can enhance the efficacy of ADR in India. As India continues to grow as a global economic player, the importance of robust ADR mechanisms will only increase, making arbitration and mediation indispensable tools for resolving disputes efficiently.
References
- Manuatra Articles
- SCC Online
- Department of Legal Affairs
- Indian National Bar Association
Author: Shivendra Singh is a first-year BBA LLB student at Army Law College, Pune.
