EVOLUTION OF ALTERNATIVE DISPUTE RESOLUTION MECHANISMS IN INDIA

Abhijita Dhar, Student, The West Bengal National University of Juridical Sciences

Introduction

Alternative Dispute Resolution or ADR is a way of resolving legal disputes, extra-legally, or outside the formal legal system established by the state. It is a cost-effective method of resolving disputes, with the most satisfactory solution available to both parties. It helps in lessening the burden of cases on the Courts, and helps parties in arriving at a solution expeditiously, without having to suffer through long periods of litigation. It is especially useful in commercial settings, owing to its time-efficient nature. ADR as a term includes extra-legal techniques like arbitration, mediation, negotiation, conciliation and the like. These alternative judicial means can play an important role in dealing with court clogging, delays, costs, etc., especially rampant in India. ADR methods have been adopted in India, through acts like the Arbitration and Conciliation Act, 1996, and Legal Services Authorities Act, 1987. While they are not meant to replace traditional judiciary, they can play a pivotal role in India’s economic progress. This article will look at how alternative dispute resolution mechanisms have been introduced and strengthened in India, and future that they hold.

ADR adoption in the world and in India

The famous principle of ‘justice delayed is justice denied’ proclaimed by William Ewart Gladstone is a strong basis building upon the need for ADR methods. Internationally, arbitration was first recognised through the Geneva Conventions on 1927 and 1937, enforcing arbitral agreements and awards. These were built upon by the New York Convention in 1958, and the Panama Convention in 1975. The United Nations Commission on International Trade Law was adopted in 1985. These international conventions serve to provide uniformity in international arbitration. They set down requirements for the validity and enforceability of arbitration agreements. They also set down guidelines for domestic arbitration laws.

ADR and its principles have been recognised in India through the Fundamental Rights under Article 14 and 21: Right to Equality and Right to Personal liberty. A just, fair and reasonable process is guaranteed by Article 21. Faster dispute resolution was thus not only an emerging need out of socio-economic changes, but also had a concrete foothold with the Constitution.

The first formal arbitration statute was the Indian Arbitration Act, 1899, only applicable in Madras, Bombay and Calcutta. The Civil Procedure Code was enacted in 1908, which allowed for arbitration in its second schedule. The Arbitration Act was formulated in 1940. It was largely based on the English act of 1934. Due to later discovered flaws, this was replaced by the Arbitration and Conciliation Act 1996. The new act was formed keeping in mind the UNCITRAL law model. Many amendments have been made further promoting and legitimising ADR methods and the legitimacy of arbitral awards, through amendments and judicial discretion.

Strengthening ADR in India by legislature and judiciary

The Arbitration and Conciliation Act has been amended multiple times, due to vagueness in some provisions, interference by courts, and other issues. In the last decade, the following significant amendments have taken place:

the 2015 amendment to Section 8 and 9 mandates all judicial authorities to refer arbitrable disputes to arbitration, if an arbitration agreement exists.
2015 and 2019 amendments allow arbitral tribunals to have the same powers as a court.
The 2015 amendment also states that sections 9 (interim measures), 27 (taking of evidence), 37(1)(a) and 37(3) (appealable orders) will also apply to international commercial arbitrations
2015 and 2019 amendments to Sections 36 and 87 state that arbitral awards will not be stayed immediately after applying under Section 34.
The court will have to be prima facie satisfied that the award was influenced by fraud or corruption to stay it.
2019 amendments provide for confidentiality of arbitration proceedings, and legal protection to arbitrator for acts done or intended in good faith.
2021 amendments allow parties freedom to choose their arbitrator.

The Act has also been interpreted by the judiciary in its decisions across various cases. Interpretations have been made to emphasis on party autonomy and promote ADR methods. Recently, in Cox and Kings v. SAP India Pvt. Ltd., the ‘group of companies’ principle was introduced to bind non-signatories to arbitration agreements as well, subject to certain criteria. Emaar MGF v. Aftab Singh identified that non-arbitrable disputes can never be referred to arbitration, like disputes on statutory rights (eg., consumer rights), and that Arbitration Act being a general law will be superseded by special legislations. Thus, amendments and judiciary played a big role in making arbitration law more robust.

Ways in which ADR is still hindered, and the way forward

While the new Act has incorporated the UNCITRAL Model Law to give India a better position in International commercial arbitration, it has not taken into account specific features of India’s judicial system and economy.

The definition of ‘courts’ in the 1996 Act causes a huge workload for the District Court judge. The principal court in the district is presided over by the District and Sessions Judge, who has to look after both civil and criminal cases. Mostly, criminal cases will be given priority, such that civil arbitration are unresolved. Since, lower courts have been excluded from the definition, this problem becomes serious.

Arbitration is based on party autonomy, but autonomy is restricted by public policy and laws. Thus, complete court non-interference is impossible. Nevertheless, the 1996 Act was made with the view to reduce court intervention. However, over the years the judiciary has been widening its scope for intervention. In the ONGC case, public policy was interpreted very widely to decide the validity of the arbitral award. In the SBP & Co. case, Supreme Court was given the ability to decide validity of an arbitral agreement, and to appoint arbitrators.

Other problems also exist, such as lack of proper infrastructure and credible institutions, and insufficient legislative efforts. An Office Memorandum in 2024 indicated a shift towards mediation rather than arbitration, despite India’s efforts to become a favoured seat for international arbitration. Thus, the adoption of ADR methods still has a long way to go.

Conclusion

Arbitration and other ADR methods can be a huge step forward in reforming the legal system into one that actually delivers timely justice. It can help with reducing work load on courts and deal with commercial dealings expeditiously, making both the judiciary and the economy more efficient. It therefore becomes imperative that the legislature takes steps to promote ADR, and reduce the prevailing issues discussed above. The 176^th Law Commission Report can be a good starting point. It acknowledges the severe delay in the arbitral process in India, and suggests reforms to tackle them.

Promoting acceptance of arbitration at the grassroots level is also an important factor. Educational institutions do not focus enough on ADR methods, save for specialised courses. This lack of literacy on ADR does makes people opt for litigation rather than arbitration, in situations where the latter is better suited.

The legislature must take progressive efforts to popularise ADR methods, both institutionally and socially. It is a newer idea, so it may take some time before effective changes are made to tackle the issues. But proper implementation and legislation can go a long way to achieve a well-functioning arbitration system in the country.