DISSERTATION ON

ALTERNATE
DISPUTE
RESOLUTION
FACULTY OF LAW ,JMI

SANDEEP CHAWDA
SUBMITTED TO | ADVOCATE SUKESH MISHRA
 Contents
1

INTRODUCTION ................................................................................................................................... 4
HISTORICAL ANALYSIS ......................................................................................................................... 7
EVOLUTION OF DISPUTE RESOLUTION SYSTEM IN INDIA ................................................................... 7
VEDIC OR PRE - SUTRA PERIOD ........................................................................................................... 8
DHARMA SUTRA PERIOD .................................................................................................................... 9
MUSLIM PERIOD ............................................................................................................................... 10
BRITISH PERIOD................................................................................................................................. 13
AFTER INDEPENDENCE ...................................................................................................................... 16
REPORTS OF COMMITTEES AND COMMISSIONS .............................................................................. 20
LEGISLATIONS ADOPTING THE ALTERNATIVE DISPUTE RESOLUTION METHODS IN INDIA .............. 23
ALTERNATIVE DISPUTE RESOLUTION MECHANISM .......................................................................... 26
THE SCOPE OF ALTERNATIVE DISPUTE RESOLUTION........................................................................ 27
CURRENT LAWS-ARBITRATION AND CONCILIATION ACT, 1996 ........................................................ 29
SALIENT FEATURES OF THE ARBITRATION AND CONCILIATION ACT, 1996 ...................................... 30
PREAMBLE ......................................................................................................................................... 30
DIFFERENT TYPES OF ALTERNATIVE DISPUTE RESOLUTIONS ........................................................... 33
ARBITRATION .................................................................................................................................... 35
MEDIATION ....................................................................................................................................... 43
CONCILIATION ................................................................................................................................... 50
NEGOTIATION ................................................................................................................................... 56
LOK ADALAT ...................................................................................................................................... 61
COMPARATIVE ANALYSIS WITH OTHER COUNTRIES ........................................................................ 67
UNITED STATES OF AMERICA (USA) .................................................................................................. 68
UNITED KINGDOM (UK) .................................................................................................................... 72
CHINA ................................................................................................................................................ 74
JAPAN ................................................................................................................................................ 77
CONCLUSION..................................................................................................................................... 80
BIBLIOGRAPHY................................................................................................................................... 82
 CASES REFERRED
2

 Agarwal engg. Co. v. Technoimpex Hungarian Machine Industries, 1977 (4) SCC
367.

 Anand Gajapati Raju v. P.C.G. Raju, AIR 2000SC 539.

 Brij Mohan Lal v. Union of India & ors. (2002 – 4 – Scale – 433).

 Babu v. Raghunathji, AIR 1976 SC 1734.

 Bhatia International v. Bulk Trading co., (2002) 4 SCC 105.

 Buchell v. Marsh 58 US.

 Bharat singh v. New Delhi Tuberclosis centre, AIR 1986 SC 842.

 Comed Chemicals ltd. v. C.N. Ramchand 2008(13) SCALE 17.

 Cutts v. Head 1984 Ch 290.

 Exall v. Bombay Mountain Beam, Colorado 1928.

 Everest lasson ltd. v, Jindal Exports ltd., AIR 2001 SC 356.

 Food Corporation of India v. Jogindar pal AIR 1939 SC 263.

 Fuerst Day Lawson ltd. Junaid exports ltd. (2001) 6 SCC 356.

 Fateh Chand v. State of Maharashtra, AIR 1977 SC 1825.

 Guru Nanak Foundation v. Rattan & sons AIR 1981 SC 2075.

 Hussainra Khatoon v. State of Bihar, 1979 CrLJ 1036

 International Airports Authority of India v. K.D. Bali & ors. (1988) 2 SCC 360.

 Indian Telephone Industries ltd., Allahabad v. District Judge, Allahabd & ors., AIR
1998 (3) All 313.

 Jagtar Singh v. State of Punjab & ors.

  K Venktulu v. State of Andhra Pradesh, 2004 AP 85.
3

 MM Acqua Technologies ltd. v. Big Brother Builders ltd., (2001) 3 RAJ 53.

 Narain Khamman v. Praduman Kumar (1985) 1 SCC 8.

 ONGC v. Saw Pipes (2003) 5 SCC 705.

 P.T. Thomas v. Thomas Job 2005(6) SCC 486

 Ramji Dayawala & Sons pvt. Ltd. v. invest Import co.

 Raipur Development Authority v. Chokhamal Construction Company (1989) 2

SCC721.

 Renu Sagar Power co. ltd. v. General Electric co. (1994) Supp (1) SCC 644.

 State of Haryana v. Chaman Lal (1977) 1 SCC 340

 Sundaram Finance ltd. v. NEPC India ltd., AIR 1999 SC 565.

 Shreeje Traco pvt. ltd. v. Paperline International Inc. (2003) 9 SCC 79.

 SBP & Co. v. Patel engg. Ltd. 8 SCC 618.

 Trustees for port of Madras v. Engg. Construction Company, AIR 1995 SC 2433.

 Telecom District Manager, Goa v. Dempo & co. (1996) 8 SCC 753.

 Venture Global Engineering Co. v, Satyam Computers pvt. ltd. (2008) 4 SCC 190.
 INTRODUCTION
4

Gandhiji once famously said: "I had learnt the true practice of law. I had learnt to find out the
better side of human nature, and to enter men's hearts. I realized that the true function of a
lawyer was to unite parties given as under. The lesson was so indelibly burnt unto me that the
large part of my time, during the twenty years of my practice as a lawyer, was occupied in
bringing about private compromises of hundreds of cases. I lost nothing, thereby not even
money, certainly not my soul."

Conflict is a fact of life. It is not good or bad. However, what is important is how we manage
or handle it. Negotiation techniques are often central to resolving conflict and as a basic
technique these have been around for many thousands of years. Alternative Dispute
Resolution (ADR) refers to a variety of streamlined resolution techniques designed to resolve
issues in controversy more efficiently when the normal negotiation process fails. Alternative
Dispute Resolution (ADR) is an alternative to the Formal Legal System. It is an alternative to
litigation. It was being thought of in view of the fact that the Courts are over burdened with
cases. The said system emanates from dissatisfaction of many people with the way in which
disputes are traditionally resolved resulting in criticism of the Courts, the legal profession and
sometimes lead to a sense of alienation from the whole legal system- thus, the need for
Alternative Dispute Resolution.

With the spread of ADR programs in the developed and developing world, creative uses for
and designs for ADR systems are proliferating. Successful programs are improving the lives
of individuals and meeting broad societal goals. There is a critical mass of ADR experience,
revealing important lessons as to whether, when and how to implement ADR projects.

It is against this backdrop, that this research paper intends to discuss the various ADR
mechanisms, the provisions present in India and the World over, and its peculiarity,
implementation and problems in the Indian context. The various remedies to the situation
have also been discussed.

When a person is confronted with a dispute, either his right is in jeopardy or duty is
unnecessarily cast upon him, which is harmful to his interests. The question of right or the
duties are decided by the nature of the laws. Laws are the rules prescribed by the society for
the government of human conduct. A law is also described as a body of principles recognised
 and applied by the State in the administration of justice1. Thus, it is an instrument, which
5

helps the people living in a society to co-exist peacefully with one another in an orderly
manner.

On the bases of the nature and the basic characteristics of any dispute resolution system, they
can be broadly classified into Adversarial, Inquisitorial and Participative System. Adversarial
style is also called as system. In this system, the disputants necessarily deny the claim or
allegation of each other, irrespective of it being indisputable. The procedural formalities force
them to rebut each other. In such a system, where a civil case is field, the pleadings of the
opposite parties differ in a diametrically opposite direction making it very complicated to
identify the real issues to be adjudicated. In criminal cases, the charges are framed on the one
hand and on the other hand, the accused provides arguments or explanation to dispute each and
every contention, or piece of evidence. The role of the presiding officer in the Court is to
consider all the oral and documentary evidence placed before him on the bases of the framed
issues and see whether the contentions are proved or not by the respective disputed parties. In
this process, he also does the work of allotting time and supervising the conduct of the persons
appearing before him and thus maintaining the Court’s decorum. This system is rigid and
formal as law prescribes the rules even before the dispute arises and the Court has to
meticulously follow every such procedural rule. The trial needs the disputed parties to come
up to the Court with their own lists of witness and documents to prove their contentions. The
examination and cross-examination of the witness are done in the presence of the opposite
party to the dispute. The trial involves the process of adjudication, where charges are tried for
proving the guilt. A trial ends with a formal legally binding judgments or decree, which is
binding and enforceable. Execution of the final judgments or decree is yet another legal process
where, the authority decides the process of enforcement like that of trial. In this system, the
Court of law functions as an independent dispute Resolution institution of the State.

In the participative system of dispute Resolution method, the negotiator and the parties
themselves take part in the process of arriving at the decision. The parties themselves script the
rules and regulations and in some cases decide the process as well. Thus, the legal formalities
are reduced to a larger extent and free and innovative ideas are ever increasing with time and
necessities in this field of participative dispute resolution method. In this system of resolution
of disputes, there is no need of witness or evidence to establish the issues. The issues between

1
Salmond, Jurisprudence, p.39.
 the parties are discussed and narrowed down by the parties themselves. The fixed rules or the
6

procedural law does not bind this system as the disputed parties, mediators and facilitators
develop their own rules depending upon the need and the demand of the context. In this system,
it is not mandatory to have either Examination in Chief and Cross- Examination of the
witnesses, the discretion to have it or not rests with the parties to the dispute. The participative
system of dispute Resolution method is a problem-solving process. In this process by all means,
it is the parties who decide the whole process guided by the principles of natural justice
including walking out of the process or successfully reaching a settlement. In this process, there
is no formal resolution or award or report but ends with a settlement to be performed or
completed settlement like the signed agreement or payment of money or tender of apology.
The authority of the Facilitator or Mediator or Negotiator flows from agreement of the parties
and consent of the parties decide the enforcement of the settlement.
The system of participative alternative dispute Resolution method can be further classified into
three types namely, the voluntary or independent method, the Court annexed methods and the
Court referred methods. In the voluntary method when the dispute arises, the parties themselves
initiate and take part in the process of mediation and negotiate among themselves for resolving
their disputes. In a Court-annexed system, a department under it undertakes to do the activity
of initiating the appropriate form of alternative dispute Resolution methods among the disputed
party before the Court of law. In this process, one of the trained persons from its panel may be
the presiding officer, who may be a Facilitator or Mediator or Negotiator or Conciliator or
Arbitrator as the case may be. In case of the Court referred methods, the parties before the
Court of law wish for a Facilitator or Mediator or Negotiator or Conciliator or Arbitrator as the
case may be to be appointed of their own choice. The case will then be referred to such other
person for the purpose of the resolution of dispute between the parties by that Court before
which the dispute is pending. In the resolution of dispute by consensual processes, the consent
of the parties to the dispute has a significant role to play. These different dispute Resolution
methods are to be effectively encouraged and put to use, with a drive to evolve a positive
approach and attitude of the disputed parties towards the availability of different techniques of
resolving their dispute. This can help in the process of finding a solution to the problem of
judicial delays and arrears before the Court of law with the effective knowledge, adoption and
use of alternative dispute Resolution methods.
 HISTORICAL ANALYSIS
7

The dispute resolution processes, which are “alternative” to the traditional Court proceedings,
are often referred to as alternative dispute resolution processes. A method of resolving a
dispute can be considered as alternative if it resolves the dispute and provide justice, with a
consensual process between the parties to the dispute. The dispute resolution may be done
with the help of a neutral third person who acts as a mediator or a middle person between the
parties to the dispute and tries to reduce the gap of differences between the parties with the
help of different process such as arbitration, conciliation, mediation or negotiations. In the
Year 1989 Supreme Court of India in the case of Food Corporation of India V Joginder Pal,
held that alternative dispute resolution process does not supplant but it supplements the
existing adjudicatory machinery through Courts of law2. Alternative dispute resolution
processes are said to be flexible, cheap, speedy and less formalistic in nature thus making it a
viable alternative for adjudication through the Courts of law.

Following the perceptive study of the concepts of dispute, the need and the necessity of
resolving the disputes for peace, prosperity and the very existence of the society in earlier
chapter of this research paper, the researcher now proceeds towards the next step of, studying
the different stages in the evolutionary history of dispute Resolution process in India.

EVOLUTION OF DISPUTE RESOLUTION SYSTEM IN

INDIA
In India, there is no authentic account available for the judicial and political institution and
civilization period prior to Aryans. The available indigenous literature pertaining to that period
is contained in Vedas and sacred religious books. In ancient times, it is found that the supreme
duty of the King was considered to be, punishing the wicked and protecting the righteous. In
the Vedic period, the King in return for the taxes paid to him by the people, performed the
duty of a Judge3. In those early times, administration of justice did not form a part of a State’s
Duty4. The study of ancient Indian literature, illustrate the conditions where the aggrieved
party himself had to take steps as he could in order to get the wrong redressed. The public

2
AIR 1989 S.C.1263.
3
Birendra Nath, Judicial Administration in Ancient India (1979), p.27.
4
Dr.A.S. Altekar, State and Government in Ancient India (1977), p 245.
 devoured one another as the strong fish devour the weaker ones in the water5. This arrangement
8

could not hold for long. As such, this method was not satisfactory and there was a dire need to
create the office of Kingship to avoid the situation of weaker being exploited by the stronger
one and there upon Lord Brahma is said to have introduced Kingship upon Manu. The people
agreed to pay certain taxes and prayed that in turn the King should destroy their enemies to
enable them to lead a peaceful life6. The Vedic King as the head of the Judiciary claimed
himself as the upholder of Dharma. Thus, the origin of judicial system in India can be traced
from pre-historic Vedic times more than 3000 odd years old, if not older still. With the passage
of time, the King used to impart Justice with the aid of his Ministers and Legal experts and the
references to this is found in the Manu smriti. The King became the holder of Law and was
not a source of law. He was guided by Dharma. He was expected to live up to the ideals of
Kingship as laid down in the Dharma sastra. The Dharma sastra and Nit sastra regarded the
King as the fountain source of all Justice. The King was the highest Court of appeal and was
expected to decide cases according to Law7. The Ancient Hindu period of Indian legal system
can be discussed chronologically under the following heads of Vedic or per Sutra period
Dharma Sutra period and the Post Smriti period8.

VEDIC OR PRE - SUTRA PERIOD

The Vedic or Pre-Sutra period can be studied under the Aryan Civilization. In the Vedic period
law, religion and justice were closely interconnected and there was no clear-cut demarcation.
The Vedas are said to be four in number namely Rig-Veda, Yajur Veda, Sama Veda and
Athurva Veda. Of these Vedas, Rig-Veda explains the structure of the society and the social
and political institutions that existed in the Vedic period. There was absence of central control
of organized government in the modern sense. The entire territory was divided into small
Kingdoms ruled over by the King, as the head of the State and not of the Society. The State
and the Society had distinct sphere of activities. National life and activities in the earliest times
as on record were expressed through popular assembles and institutions9. There were a
gradation of Courts and the King was the highest Court of appeal. Appeal lay from the lower

5
C.P. Ramaswamy Aiyar. Some Aspects of Social and Political evolution in India” (1969), p497.
6
S.K. De, The Cultural Heritage of the India. (1969, Vol.II), p 497.
7
R.C. Majumdar, The History and Culture of the Indian People: The Vedic Age (1965), p475.
8
S. Varadachariar, The Hindu Judicial System, p 10
9
Dr. Radha Kumul Mookerjee, Local Government in Ancient India, p22.
 Courts to higher Courts. The three most important and popular bodies were Parishad, Samiti,
9

and Sabha.

The ‘Parishad’ was an advisory body on religious matters but it also discharged some judicial
functions. ‘Samiti’ was the body for general deliberations where all kinds of policy matters
were discussed. This body also discharged legislative and judicial functions. It was the
assembly of whole of the People. The most important function of Samiti was the election and
re-election of the King. The King considered himself duty bound to participate in the
deliberations of the Samiti and thus emerged to be the sovereign body. The ‘Sabha’ was a body
of selected persons presided by the king himself. Sabha was the national judicature, due to the
reasons that the resolutions of the Sabha were considered to be binding on all the persons10.

DHARMA SUTRA PERIOD

Dharma sutra period is also called as the golden period of Indian Legal History. With the
advancement of time and society, the people progressed towards Civilization. The law
propounded by the Smriti writers was more systematic and comprehensive in nature and laid
down certain sets of principles to be followed by the people and the King alike. The principal
Sutras are the Dharma Sutra of Gautama and Baudhyana, Sutras of Apastamba, Harita,
Vashista, and Visnu. The areas that were mainly dealt by the Sutras were rules of civil and
criminal Law, marriage, inheritance, succession interest and partition11. The important Smritis,
which contributed immensely towards the development, are Manu Smriti, Yajnavalkya Smriti,
Narada Smriti, Brihispati Smriti and the Katyana Smriti. The study of Arthasastra of Kutilya
reveals that there were two types of Courts viz., Dharmasthiya or the Civil Courts and
Kantakasodhana of Criminal Courts12. The administration of Justice was decentralised in order
to avoid delay and other complications connected with the investigation of cases. Kautilya and
Manu have given different system of gradation of Courts. Kautilya has given much importance
to Popular Courts and in his scheme, Courts were instituted at Sangrahana, Dronamukha,
Sthaniya and where the District met. According to the scheme of Manu that was adopted by
Yajnavalkya, Narada, Brihaspati and Katyayana, the Sabha system formed the basis of forming
and grading Courts. The Courts were known as Popular Courts and were termed as Kula, Sreni,
and Gana Courts and the idea behind these Courts was to enable each and every person to

10
K.P. Jaiswal Hindu Polity P 21,14.
11
Dr. S.K. Puri, Indian Legal and Constitution History (1980), P2,3.
12
Birendra Nath, Judicial Administration in Ancient India (1979), p.27.
 receive justice without delay. In the Sutra and the Smiriti period there were hierarchies of
10

Courts at different levels. At the apex of the Judicial hierarchy was the Royal Court called
‘Sabha’. It was staffed by experienced Councilors who advised the King on the Points of Law
in accordance with the law laid down in the sacred textbooks and the local customs. The rulers
of ancient India who administered justice were subject to certain traditional obligations and
customary limitations. They had to take into consideration the laws of the guilds in
administering justice. Secondly, all were not equal in the eyes of law. The punishment for the
offences depended on the social status of the offender. The cast of the offender also influenced
the judgments13. The Yajnavalkya mentions three types of Popular Courts namely the Kula,
Shreni, and the Pugha. The ‘Kula’ was the assembly of persons of the same family or
community tribe, cast or race and charged with the function to decide the disputes amongst the
persons who felt equality bound by its decisions. The ‘Shreni’ was the assembly or association
of persons following the same avocations or trade and the ‘Pugha’ is interpreted in three senses
namely companies of traders, association of persons differing in castes and the riders on the
elephants and horses. The existence of jury system is specifically mentioned in the Smritis. It
was the duty of the jury to consider the truth or the cause before the Court 14. The existence of
People’s Court in ancient India finds mention in Narada Smriti. The Jurors in ancient India
were selected from the higher classes and those who were the most respectable in the society.
The main qualification for the person to be juror was that, he was well versed with the question
of law and fact involved in the dispute referred by the parties.

MUSLIM PERIOD
The study of history of Indian legal system reveals that the recognized Hindu period changed
with the Muslims invasion. In Medieval period, the society in India was broadly divided in to
two parts Hindus and Muslims. The Muslim invasion was made by Mohammudbin-quasim in
712 AD. He came to India as invader and returned thereafter. Qutub-uddin Aibek made the
real penetration into India. He in reality established himself firmly in India after waging series
of wars. The Muslims thereafter continued to rule over India until 1857 when the Britishers
dethroned the last Mughal King Bahadhadur Shah Zafar. Their holy books, certain rules of
practices and traditions governed the Hindus and Muslims in their social relations and political

13
H.V. Sreenivasa Murthy, V.S. Elizabeth, History of India, p8.
14
P.V. Kane, History of Dharma sastra (1973), p281
 organization. The judicial structure, which existed in India during Muslim rule, is studied under
11

the ‘Sultanate Period’ from 1206 AD to 1526 AD and under the ‘Mughal Period’ starting from
1526 AD that lasted up to 1680 AD15.

In this period, the civil and canon law cases pertaining to the Hindus were heard by learned
Brahmans appointed for the purpose, while the criminal cases were tried according to Islamic
Law. The revenue cases were tried according to the local tradition. The Muslim Rulers did not
interfere with the Law of Hindus and Hindus continued to be governed by their own laws in
personal matters. The judicial structure gave due place to the then existing institution in India,
such as Village Panchayat which served as extremely useful in the settlement of dispute during
ancient India. Panchayat were the lowest trail Courts and their findings were final in petty
cases. The characteristic of the Sultanate Period was that the Sultan was the Supreme authority
to administer Justice in his Kingdom. The Justice was administered in the name of the Sultan
in three capacities. Firstly, as the arbitrator in the disputes of his subjects, he dispensed justice
through the Diwan-e- Qaza. Secondly, as the head of the bureaucracy, he dispensed justice
through the Diwan-e- Mazalim. Finally, as the Commander-In-Chief of Forces, through his
military commanders who constituted Diwan-e- Siuasat, tried the rebels and those charged with
high treasons. As in case of ancient India, during the Muslim rule also, all were not treated as
equals in the eyes of law and the Hindus as well as poor were discriminated against the Muslims
and the rich respectively16. The culture of the Muslim ruler and the Hindu subjects differed
materially but there was great affinity with regard to the law as both the system had their origins
in the religion. Therefore, both the systems of law were given due recognition by the Courts in
settling the disputes between the parties with regard to civil matters but the entire Criminal
administration of Justice was based on the Criminal Law principles followed by the
Mohammedan. The punishment was inflicted upon criminals in accordance with the provisions
of the criminal law governing Mohammedan 17.

The Muslim ruler while ruling over India regarded themselves as the servants of the God
(Allah). Mohammad, the Prophet of Islam, also preached this message. It is pertinent to note
that they considered the administration of justice as an essential act for the fulfilment of this

15
M.B. Ahmad, The Administration of Justice in Medieval India, Pg 98
16
H. Beveridge, History of India (1914), p102.
17
Dr.V.C. Sarkar, Epichs in Hindu Legal History, Pg.200-203, (ed.1958)
 responsibility. As laid down in Fatwa- Alamgir, the Courts in India were to be guided by the
12

following authorities while deciding the disputes. Firstly, the sacred book of Muslims the
Quran; it collected the revelations of Mohammed in a definite written form. The
Mohammedans were and are still governed by this sacred book. Secondly, the Sunna, which is
the words, deeds, and silent approval of prophet during his lifetime, which were reduced to
writing, and came to be termed as Sunna or traditions. These traditions gradually laid the
foundations of Islam. Thirdly, the concurrent opinion of the Prophet’s companions called the
Ijma, literal meaning of it is “agreeing upon”. Those disputed point of law which was resolved
by the agreement of the persons who have right, in the nature of knowledge, to form a Judgment
of their own after the death of Prophet thus came to be regarded as a valid source of law.
Finally, judgments according to the individual discretion of the Judge based on the doctrine of
Justice, Equity and Good Conscience guided the function of resolution of disputes18.

There was very systematic classification of the gradation of the Courts during the Muslim Rule
in India19. The Central Court were six in number namely, the King’s Court, Diwan-e- Muzalim,
Diwan-e- Risalat, Sadre Jahan’s Court, Chief Justice Court and Diwan-e- Siyasat. The
Provincial Courts were five in number namely, Adalat Nazim Sabha, Adalat Qazi-e- Subah,
Governor’s Bench (Nizam-e- Subha), Diwas-e- Subah and Sader Subah. At the District level
Qazi, Dadbaks or Mir Adils, Faujdaris, Sader Amirs and Kotwals were functioning. At each
Parghnah headquarter two Courts were established namely Qazi - e- Parganah and Kotwal.
According to Abu Hanifah, the Quazi could act on the Principle of Istihsan (Public good)
Istislah (Public policy) or Istishab (Concordance). A Parganah was further divided into the
village assembly or Panchayat, which were vested with enormous powers to decide civil and
criminal cases of purely local character20. The lowest on the ladder of hierarchy of Courts were
the village council popularly known as Lok Adalat of today. The Qazi were entrusted primarily
with both civil and criminal administration and their counter parts in the provinces and districts.
Nevertheless, it cannot be denied that there existed qazis who were well known for their
character, integrity and sound knowledge of law. During this period, the gift system was a
recognized institution. The Emperor did not consider any petition unless it was supported by

18
Dr. S.K. Puri, Indian Legal and Constitution History (1980), p 18.
19
B.M. Gandhi, V.D. Kulshreshtha’s Landmark in Indian Legal and Constitutional History (19992), p 19,
p20
20
W. Briggs, Rise of the Mohammedan Power in India, (1829), III, p420. \
 gifts21. Thus, there existed a well-organized judicial institution with clearly defined procedure
13

similar to institutions in modern times. The Mughal Dynasty continued up to 1850 and
normally up to 1857, when there after the queen of England took over the control of India.

BRITISH PERIOD
India had flourishing trade with the western world and the balance of trade was always in the
favour of India. Much of the trade was carried on through land routes. Portuguese were the
pioneers in finding the new sea routs. Vasco da Gama landed at Calicut and thus the cape route
to India was discovered. During the 16th century the Portuguese maintained supremacy in
Indian Ocean. The spectacular success of the Portuguese attracted other European countries
and Dutch, the English and the French, in that order, began to compete with the Portuguese.
The British East India Company received its Charter from Queen Elizabeth in 1600, and the
Emperor Jahangir issued a Firman to the Company in 1613 to establish a permanent factory at
Surat. This became the chief settlement of the company in India. In the due course of time,
specifically after the battle of Plassey in 1757 and until the annexation of Oudh in 1856, the
British were successful in establishing their paramount in India. Thus, by this time the British
East India Company was supreme from Himalayas to Kanyakumari and from Sind to Burma.
The Impact of West brought about momentous changes in India, which was not anticipated by
the Europeans. English replaced Sanskrit as the language of the intelligentsia, and English
language seemed to be Lingua Franca that is, the Common all India language. It is thus very
significant to point out that, it was through this medium the first fifteen years of the Indian
national movement was confined to those, who had learned and mastered the English language
and were brought up essentially in the western style22.

The dispute Resolution function in the beginning of British Raj was delegated to the native
people for the reason the Britishers were unaware of the local language and the local Laws.
The Britishers also had the fear that the act of the punishment of the members of the native
population could lead to agitation at any time23. With the induction of British judges trained in
Common Law into the Indian Judicial system, the Courts were reorganized and the entire
working of local Courts was reshaped. The judicial administration in three presidency towns

21
A.B. Pande, Society and Government in Medieval India, p166.
22
H.V. Sreenivasa Murthy, V.S. Elizabeth, History of India, p 9, to 14.
23
R.C..Majumdar, An Advanced History of India, (1977), p553.
 namely, the Calcutta Presidency, Madras Presidency and Bombay Presidency prior to 1726
14

were found wanting in uniformity and remained disoriented, informal and unsatisfactory. The
Charter Act of 1726, introduced a uniform judicial system by the creation of Mayors Court in
each of the presidency towns, namely Madras, Bombay and Calcutta and later territories
surrounding the presidency towns were brought under its control24. In the year 1772 Warren
Hasting took over Bengal, Bihar and Orissa and established a well-organized judicial system.
The Chief features of this Adalat System were Mofussil Diwani Adalat (Civil Court), Mofussil
Fauzadari Adalat (Criminal Court), Court of the Head Farmer of Parganas dealing with petty
civil cases, Sadar Diwani Adalat to hear appeals from the decisions given by Mofussil Diwani
Adalat and Sadar Nizamat Adalat to hear appeals from the decisions given by Mofussil
Nizamat Adalat25. Numbers of regulations were newly introduced and the old ones were
repealed to reform the judicial administration in India. The Government of India Act, 1935
proposed a federal form of government for the whole of India and the provinces were given
some autonomous character and they began to be treated on a federal basis. Thus, Federal Court
was created which were the independent Courts, to decide the future disputes between the units.
First Federal Court was set up at Delhi in 1937. Federal Court possessed exclusive original
jurisdiction to determine disputes between the units inter se or between the centre and the units
on the objective interpretation of the provisions of the Act. As appellate body, it heard appeals
from the High Courts on the certificate that the case involved a substantial question of law for
decision. Through the advisory jurisdictions, the Federal Court rendered advice to the
Governor-General on any point of law referred by him in an open Court in the presence of
26
Lawyers of all the parties .Thus, it was the highest Court in India. The appeals against the
decision of the Federal Court lay to the Privy Council, which was the highest Court of appeal
for India in England.

Some of the regulations made during British Rule, played an important role in the survival of
alternative methods of resolving the disputes, along with the system of adjudication through
Courts. The Bengal Regulation Act, 1772 that provided that, in all cases of disputed accounts,
parties are to submit the same to arbitrators whose decision are deemed a decree and shall be
final. The Regulation of 1781 provided for the judges to recommend without any compulsion,

24
M.P. Jain, Indian Legal History (1966),85.
25
Dr. S.K. Puri, Indian Legal and Constitution History (1980), p 45-46
26
M.V. Paylee, Constitutional History of India (1600-1950), p.86.
 prevail upon the parties to submit to the arbitration before a person that is mutually agreed
15

upon by the parties to the dispute. The regulation of 1787 empowered the Court to refer suits
to arbitration with the consent of the parties. The procedure of conducting the arbitration was
introduced by the regulation of 1793. The Madras Presidency Regulation VII of 1816
authorized the District Munsif to convene district panchayat for civil suits relating to real and
personal property27. Bombay Presidency Regulation VII of 1827 provided for arbitration of
Civil Disputes. India was governed by combination of conflicting laws and systems of
administration of justice before the British rulers enacted The Charter Act, 1833. The
codification of laws was the beginning of legal and judicial reforms in India. When the East
India Company started taking over administrative control, the Presidency Governments in
Bengal, Madras and Bombay enacted ‘Regulations’28.

The Charter Act of 1833 provided for the establishment of the legislative council for India in
the year 1834. The Act VIII of 1857 codified the procedure of Civil Courts. Sections 312 to
325 of this Act dealt with arbitration in suits and Sections 326 and 327 provided for arbitration
without the intervention of Court. The Code of Civil Procedure was revised in the year 1882
and the provisions relating to arbitration was reproduced under Section 506 to 526. The
provision for filing and enforcement of awards on such arbitrations was made in 1882 Act No.
XIV. The first Indian Arbitration Act was introduced in the year 1899 based on the English
Arbitration Act of 1889.It was the first Substantive law on the subject of arbitration. Due to
several defects in this Act, in the 1908 the Code of Civil Procedure was re-enacted and the
provisions relating to arbitration were set out in the Second Schedule of the code, though no
substantial changes were made in the law of Arbitration. In 1925, the Civil Justice Committee
recommended several changes in the arbitration law. On the basis of the recommendations by
this Committee, the Indian legislature passed the Arbitration Act of 1940.

In the year 1940, the Arbitration Act was enacted29. This Act replaced the Indian Arbitration
Act of 1899, Section 89, Clauses (a) to (f) of section 104(1) and Second Schedule of Code of

27
Epoch, Hindu Legal History, (1958), p335.
28
Thomson and Garratt, Raise and fulfilment of British Rule in India (1958), p300-301.
29
Salil K. RoyChowdhury, H. K. Saharay, Arbitration Law, (III Ed), p6,7.
 civil Procedure 1908. Thus, Arbitration Act of 1940 finally amended and consolidated the Law
16

relating to arbitration in the British India.

The ascendance of the People’s Court in British India was not deliberate but was gradually
weakened by several factors. The extension of civil and criminal Courts with adversary system
of adjudication, which was unknown and new to the village population, the progress of English
education, the Police organisation, the migration of people from villages to towns, the growing
pursuits of individual interest and consequential lessening of community influence over the
people can be regarded as the main factors, which gradually contributed to the decay of the
People’s Court in India. There was a complete centralization of judiciary and the local Courts
were discouraged and replaced by the Royal Courts30. Technicalities were introduced into the
Indian judicial system; the adjudicatory process became more and more formal with the
introduction of Anglo-Saxon system. The poor man found it difficult to enter into the portals
of the Courts, and found difficulty in to use of the legal process. The advent of British rule
finally led to the decline of People’s Court in India. The People’s Court thus entered into the
era of lessening importance, and finally vanished, as a result of British policy of Feudalistic
control of the countryside. The legislations introduced by the British Rule brought about a
perceptible change and uniformity in the administration of justice in India 31. The influence of
English, after the fall of Muslim rule in India, made a massive structure of Indian law and
jurisprudence resembling the height and symmetry and grandeur of the Common law of
England. The ‘Adversarial System’ of justice was introduced in India, where two opposite
parties are pitched against each other, both given levels playing field and opportunity to present
their case before the judge.

AFTER INDEPENDENCE
After the dawn of freedom in India, powerful voices were raised for providing speedy,
inexpensive and substantial justice, which suit the genius of Indian people. The drawbacks of
Anglo-Saxon Judicial system were recognized and founding fathers of the National Charter
made an effort to recognise the existing system on the lines of home-grown legal system that
existed in India since the dawn of its civilization. The drafters of the Constitution aimed that,
the judicial process must be reorganized and justice must be brought near to the people. The

30
K.N.C. Pillai, Criminal Jurisdiction of Nayaya Panchayats, JILI (1977), p438,439.
31
Dr. S.K. Puri, Indian Legal and Constitution History (1980), p 45.
 sole of the good government is providing justice to the people; as such, the Preamble of the
17

Constitution highlighted the aspect of political, social and economic justice to the people32.
The Article 39-A of the Constitution of India, secures the operation of the legal system,
promotes justice on the basis of equal opportunity, so that no citizen is denied access to justice
on account of financial or other disability33. With the enforcement of the Constitution in 1950,
the Supreme Court of India is established as the apex Court in the country. On 26th January
1950 the Federal Court yielded the place to the Supreme Court, all the judges became the
judges of the Supreme Court. It was invested with the original, appellate and advisory
jurisdiction in the constitutional, civil, criminal and other matters34. Next the High Court’s
where established in each State or a group of Union territory and the States. The lower judicial
setup in civil judicial setup consists of the District Courts, Sub-Courts, and the Munsif Court.
The Criminal cases are dealt as per the Section 6 of Code of Criminal Procedure 1973 35. This
section states that besides the High Court and the Courts constituted under any law, other than
this Code, there shall be Courts of Sessions, Judicial Magistrate of First class and Second-class
Courts and Executive Magistrates. Indian judiciary has transverse a long way since the days of
rule of East India Company. By the end of the Second World War in 1945, particularly after
independence in 1947, the trade and industry received a great fillip. The commercial
community became more inclined towards arbitration for settlement of their disputes. It was
the development as against litigation in Courts, which involved long delays and heavy
expenses. With increasing emphasis on arbitration, there was the judicial grist exposing the
infirmities, shortcomings and lacunae in the Act of 1940.

The Arbitration Act of 1940 could not give desired result. One of the main difficulties faced in
international arbitration was relating to the recognition and enforcement of an arbitral award
made in one country by the Courts of other countries. This difficulty was sought to be removed
through various international Conventions such as the Geneva Convention and the New York
Convention. India became a party to certain international conventions dealing with the
enforcement of foreign arbitral awards. The Geneva Protocol on Arbitration Clauses, 1923,
came into force on 28th July 1924. The Geneva Convention on the execution of Foreign

32
V.N. Shukla, Constitution of India (2003), p 1.
33
Ins.by the Constitution (42nd Amendment) Act, 1976, S.8 (w.e.f. 3-1-1977)
34
V.N. Shukla, Constitution of India (2003), p304
35
Ratan Lal and Dhirajlal, The Code of Criminal Procedure ,17 th ed, p19-20.
 Arbitral Awards, 1927, came into force on 25 July 1929. India became party to both the
18

Protocol and the Convention on 23 October 1937. The Arbitration (Protocol and Convention)
Act 1937 was enacted in India for giving effect to the obligations under the said instruments.
In the year, 1960 India became party to the New York Convention on the Recognition and
Enforcement of Foreign Arbitral Awards 1958. For giving effect to this convention, India
enacted the Foreign Awards (Recognition and Enforcement) Act, 1961. The law of Arbitration
was thus contained in these three enactments namely, The Arbitration Act of 1940, The
Arbitration (Protocol and Convention) Act of 1937 and the Foreign Awards (Recognition and
Enforcement) Act of 196136.

The liberalisation of Indian economy opened the gates for inflow of foreign investment. India
opened its economy and took several measures of economic reforms in the early 90’s. After
the development in the international trade and commerce, with the increasing role of GATT
and later WTO, there was a spurt in trading in goods, services, investments and intellectual
property. Disputes arose between the trading parties, which were diverse in nature and
complex, involving huge sums. Such disputes required quick and amicable settlement since the
parties could not tolerate the prolonged legal process in Courts, appeal, review and revision.
Indian judiciary played a very substantial role in the process of emphasizing the need for the
change in the then existing arbitration laws. Along the same lines, the apex Court had also
recognised the alternate forum in its various decisions. In Sitanna Vs. Viranna, AIR 1934 SC
105, the Privy Council affirmed the decision of the Panchayat and Sir John Wallis observed
that, the reference to a village panchayat is the timehonored method of deciding disputes. It
avoids protracted litigation and is based on the ground realities verified in person by the
adjudicators and the award is fair and honest settlement of doubtful claims based on legal and
moral grounds. In the year 1981, the Supreme Court of India in Guru Nanak Foundation V/S
Rattan & Sons37 observed, “Interminable, time consuming, complex and expensive Court
procedures impelled jurists to search for an alternative forum, less formal, more effective and
speedier for resolution of disputes avoiding procedure claptrap and this led them to Arbitration
Act, 1940. However, the way in which the proceedings under the 1940 Act are concluded and
without an exception challenged in the Courts, had made lawyers laugh and legal philosophers

36
Chandrasekhara Rao, The Arbitration and Conciliation Act,1996, (1997), p4,5
37
AIR 1981 SC 2075 ;( 1981)4 SCC 634. 115 AIR
1981 SC 2085 ;( 1981) 1 SCC 80.
 weep. Experience showed and law reports bore ample testimony that the proceedings under the
19

1940 Act had become highly technical, accompanied by unending prolixity, at every stage
providing for a legal trap to the unwary. Informal forum chosen by the parties for expeditious
disposal of their disputes had by decisions of the Court been clothed with ‘legalese’ of
unforeseeable complexity.”

In the year 1981, Justice D.A. Desai of the Supreme Court in Ramji Dayawala and Sons (P)
Ltd Vs Invest Import case accentuated that, the protracted, time consuming, exasperating and
atrociously expensive Court trails impelled an alternative mode of resolution of disputes
between the parties thus, arbitrate-don’t litigate. Arbitration being a mode of resolution of
dispute, by a Judge of the choice of the parties, can be considered to be preferable to that of
adjudication of disputes by Court. If expeditious, less expensive resolution of disputes by a
Judge of the choice of the parties was the consummation devoutly to be wished through
arbitration, experience shows and this case illustrates that the hope is wholly belied because in
the words of Edmond Davis.J in Price Vs Milner38, these may be disastrous proceedings. In
the year 1995 in the case of, Trustees for the Port of Madras Vs Engineering Construction
Corporation39, Supreme Court of India said that the Act of 1940, which contained the general
law of Arbitration, had become outdated and was not in harmony with the arbitral mechanism
available to resolve the disputes in most of the countries in the world. A number of foreign
investors started expressing restrain, as they would not like to invest in India unless disputes
arising out of their investments are settled abroad. Under the 1940 Act, the parties had to go to
the Court to make the awards final. Interference by the Courts at the instance of one party or
the other and a considerable delay in disposal of matters gave rise to demands to repeal the
1940 Act. These factors acting together made it essential for India to devise a new legal regime
relating to both domestic and international commercial arbitration. To attract the confidence of
the international mercantile community in the context of growing volume of India's trade and
our commercial relationship with the rest of the world after the new liberalization policy of the
Government, The Arbitration and Conciliation Act, 1996 Act was passed. This Act was in
harmony with the UNCITRAL Model Law on International Commercial Arbitration, 198540.
The Arbitration Act, 1940 (the 1940 Act) governed the law relating to arbitration until it was

38
(1966)1WLR 1235
39
AIR1995 SC 2423;1995(2) Arb LR 331.
40
N. K. Acharya, Law Relating to Arbitration and ADR. (2004), p2,3
 replaced by the Arbitration and Conciliation Act, 1996 (the 1996 Act). The 1940 Act had a
20

number of drawbacks, including provisions for Court intervention at a number of stages in the
proceedings, which resulted in delays. The 1996 Act remedied these procedural defects. It was
enacted to cover comprehensively international commercial arbitration and conciliation as well
as domestic arbitration and conciliation. It aimed to make the arbitral process fair, efficient and
capable of meeting the needs of arbitrations. The 1996 Act introduced, among others, the
changes such as the arbitral tribunal must give reasons for passing an award and must remain
within the limits of its jurisdiction. An arbitral award must be enforced in the same manner as
if it were a decree of a Court. The arbitral tribunal is permitted to use Conciliation during
arbitral proceedings to encourage settlement of disputes (with a view to minimizing the
supervisory role of the Courts in the arbitral process). A settlement agreement reached by the
parties as a result of Conciliation proceedings, will have the same status and effect as an arbitral
award on agreed terms on the substance of the dispute rendered by the arbitral Tribunal. For
the purposes of enforcement of foreign awards, every arbitral award made in a country to which
one of the two international conventions relating to foreign arbitral awards to which India is a
party applies is treated as a foreign award. The Arbitration and Conciliation Act, 1996 repealed
the Arbitration (Protocol and Convention) Act of 1937, the Arbitration Act of 1940 and the
Foreign Awards (Recognition and Enforcement) Act of 1961.The Arbitration and Conciliation
Act of 1996 received its assent on August 16, 1996. It contains 86 Sections and three schedules;
Part I of the Act contains general provisions on Arbitration. Part II of the Act consolidates the
two Acts for enforcement of ‘Foreign Awards’. Part III of the Act provides for Conciliation.
Part IV of the Act contains supplementary provisions. The basic features of the 1996 Act can
be summarised as, it provides for the party autonomy, minimum judicial intervention and
maximum judicial support. The main objectives of the 1996 Act as per the preamble of the Act
are to cover international and domestic arbitration comprehensively, to minimize the role of
Courts and treat arbitral award as a decree of Court, to introduce concept of conciliation and
Lastly, to provide speedy and alternative solution to the dispute41.

REPORTS OF COMMITTEES AND COMMISSIONS

To understand and establish the role of alternate dispute Resolution methods, that can substitute
the formal method of settlement of disputes within the framework of formal procedures
conceived in the Code of Civil Procedure through the Courts and other enactments, the

41
O.P Malhotra, Indu Malhotra, The Law and Practice of Arbitration and Conciliation, p1,32
 Government has time and again appointed various Committees and Commission. The reports
21

of these Committees and Commission have always played a major part in the various
legislative amendments and recommendations proposed by the Law Commission India in its
study on various aspects of judicial reforms. In 1949, Justice Sudhi Rajan das High Court
Arrears Committee was constituted to look into the problem of delays. The committee
recommended the curtailment of appeals and revision to reduce the backlog of cases in the
High Courts. In 1951, Justice Das Committee made recommendations to unify and consolidate
the legal profession. In 1972, Justice Shah Committee was constituted to report on the arrears
in the High Courts. The Seventy-seventh Report of the Law Commission was assigned
exclusively to the problem of "Delays and Arrears” in Trial Courts. This was published in
1978. In this report, the Commission fairly admitted that, "The problem of delay in the disposal
of cases pending in law Courts is not a recent phenomenon. It has been with us since a long
time. A number of Commissions and Committees have dealt with the problem, and given their
reports. Although, the recommendations, when implemented, have had some effect, the
problem has persisted. Of late, it has assumed gigantic proportions. This has subjected out
judicial system, as it must, to severe strain. It has also shaken in some measure the confidence
of the people in the capacity of the Courts to redress their grievances and to grant adequate and
timely relief”. In 1989, the Government of India, on the advice of then Chief Justice of India,
constituted Arrears Committee (189-1990) under the Chairmanship of Justice Malimath, who
was the Chief Justice of the Kerala High Court. The terms of reference of the Committee were
interalia, to suggest ways and means, to reduce and control the arrears in the High Courts and
the subordinate Courts. The Committee submitted its comprehensive report in 7th August
1990. The other members of this Committee were Dr. Justice A.S. Anand, the then Chief
Justice of Madras High Court and Mr. Justice P.D. Desai, the then Chief Justice of Calcutta
High Court. The terms of reference of the Committee were, inter alias, to suggest ways and
means, “to reduce and control arrears in the High Courts and Subordinate Courts.” It identified
the causes of accumulation of arrears like the litigation explosion; the increased legislative
activity; the accumulation of First Appeals; the continuation of ordinary civil jurisdiction in
some High Courts; the Inadequate number of Judges; the Appeals against orders of quasi-
judicial forums going to High Courts; the unnecessary numbers of revisions and appeals; the
lack of modern infrastructure in the High Courts; the unnecessary adjournments; the
indiscriminate use of writ jurisdiction in High Courts; the lack of facilities to monitor, track
and bunch cases for hearing in Courts; the changing pattern of litigation and lack of strategies
 42
to deal with new litigation with new techniques; the social awareness in the masses . The
22

Malimath Committee made a large number of useful recommendations like the introduction of
Conciliation procedure in writ matters and setting up of Neighbourhood Justice Centres with
statutory status. The function of such centres should be confined to resolving disputes by
reconciliation. The Committee also favoured the machinery of Conciliation Courts for
resolving disputes arising under the Rent Control Act.

The Report of Malimath Committee became the basis of finding solutions of the problems of
arrears during the Law Ministers’ meetings which took place in 1992-93 at Bangalore,
Pondicherry, Pachachi and Calcutta. A joint Conference of the then Chief Ministers of the
States and Chief Justices of High Courts was held on 4th December, 1993 at New Delhi under
the Chairmanship of the then Prime Minister of India and presided over by the Chief Justice
of India. It adopted the following resolution: “The Chief Ministers and Chief Justices were of
the opinion that Courts were not in a position to bear the entire burden of justice system and
that a number of disputes lent themselves to resolution by alternative modes such as
arbitration, mediation and negotiation. They emphasized the desirability of disputants taking
advantage of alternative dispute resolution which provided procedural flexibility, saved
valuable time and money and avoided the stress of a conventional trial” 43. The Malimath
Committee while making a study on ‘Alternative Modes and Forums for Dispute Resolution'
endorsed the recommendations made in the 124th and 129th Report of the Law Commission
to the effect that the lacuna in the law as it stands today, arising out of the want of power in
the Courts to compel the parties to a private litigation to resort to arbitration or mediation,
requires to be filled up by necessary amendment being carried out. The Committee stated that
the conferment of such power on Courts would go a long way resulting in reducing not only
the burden of trial Courts but also of the Revisional and Appellate Courts. Thus, there would
be considerable divergence of work at the base level and the inflow of work from Trial Courts
to the Revisional and Appellate Courts would thereby diminish44. The Law Commission
headed by Shri M.C. Setalvad, after thorough survey of the legal and judicial system, gave the
Fourteenth Report dated 9th November 1978. The Report said that the problem of delay in

42
Arrears Committee Report (Malimath Committee Report) dt 7 August 1990.Vol-1section 8.21, 8.37, Vol-
II Section 8.71to 8.91, 112-17.
43
Malimath Committee Report, Chapter VIII, p112 and Chapter IX p168,170,171.
44
Justice Dr. M. K. Sharma, High Court of Delhi, Conciliation and Mediation, p 4
 disposal of cases poses a challenge to the system, presence of conflicting decisions on various
23

points, areas where reforms were needed and also pointed out that litigation has increased
manifold and costs of litigation have increased frustrating common man's efforts to have
access to justice45. The Law Commission in its 129th Report examined at length the nature of
litigation in urban areas and highlighted the staggering pendency of cases in various Courts of
urban areas. It was pointed out that as on 31st December 1984, 2,48,845 cases were pending
in Sessions Courts, 77,41,459 cases in Magisterial Courts, 29,22,293 cases in Civil Courts of
original jurisdiction and 10,91,760 cases on the appellate side. Special attention was given in
the Report to house rent and possession litigation in urban areas and as an alternative to the
present method of disposal of disputes under the Rent Acts, three distinct modes were
considered. Firstly, on the establishment of Nagar Nyayalaya with a professional Judge and
laying them on lines similar to Gram Nyayalaya and having comparable powers, authority,
jurisdiction and procedure. Secondly, on the hearing of cases in Rent Courts by a Bench
Judges, with minimum two in number, and no appeal but only a revision on questions of law
to the district Court. Thirdly, on the setting up a Neighbourhood Justice Centres involving
people in the vicinity of the premises in the resolution of dispute.

LEGISLATIONS ADOPTING THE ALTERNATIVE DISPUTE RESOLUTION

METHODS IN INDIA

The enactment of the Arbitration and Conciliation Act, 1996 has provided for an elaborate
codified recognition to the concept of Arbitration and Conciliation as discussed in the
succeeding chapter of this research thesis. The Code of Civil Procedure, under section 89 has
introduced four alternative methods to settle disputes outside the Court, namely through
Arbitration, Conciliation, Lok Adalat and Mediation. The Constitution of India, Article 51,
clauses (c) and (d) provide that the State shall endeavour to foster respect for international law
and treaty obligations and encourage settlement of international dispute by arbitration. The
Constitution of India puts arbitration under the Articles providing for the Directive Principle
of State Policy. The Article 39-A of the Constitution provides that, the State shall secure that
the operation of the legal system promote justice, on the basis of equal opportunity, and shall,
in particular provide free legal aid, by suitable legislations or schemes or in any other way, to

45
The 14th Law Commission Report (1958) p ,252-263
 ensure that opportunities for securing justice are not denied to any citizen by reason of
24

46
economic or other disabilities . There are large numbers of Central and State Acts, which
contains statutory provisions for arbitration. Arbitration is recognized under Indian Contract
Act, 1872 as the first exception to Section 28, which envisages that any agreement restraining
legal proceedings is void. The Legal Service Authorities Act, 1987 brought another
mechanism under alternative dispute Resolution method with the establishment of Lok Adalat
system47. The Industrial Dispute Act, 1947 statutorily recognized conciliation as an effective
method of dispute resolution. Sometimes the submission instead of being ‘voluntary’ is
‘imposed’ by statute. Such arbitrations are called statutory arbitrations. There are more than
25 Central Acts providing for statutory arbitration in India. Like The Companies Act,1956;
The Cantonments Act,1924; Cooperative Societies Act ,1912; Indian Electricity Act, 1910
48
Land Acquisition Act,1894; Provincial Insolvency Act,1890;Telegraph Act,1885 Assam
Land Revenue Regulation,1886; Bombay Land Revenue Code, 1897; Punjab Land Revenue
Act,1887; Punjab Cooperative Societies Act,1961; U.P Co-operative Societies Act, 1960;
Maharashtra Co-operative Societies Act, 1961;Damodar Valley Corporation Act; A.P Co-
operative Societies Act, 1964 Madras Town Planning Act, 1920 ; Madras Co-operative
Societies Act,1932; are few examples in this regard. With regard to the absolute necessity to
evolve an alternative mechanism of resolution of disputes, Parliament in India has enacted
three Acts namely: The Legal Services Authorities Act, 1987 which has been amended by
Legal Services Authorities (Amendment) Act, 2002; The Arbitration and Conciliation Act,
1996; and The Code of Civil Procedure (Amendment) Act, 1999, which came into effect from
1 July 2002. With this amendment Sections 26, 27, 32, 60, 95, 96, 100-A, 115 and 148 were
amended and Section 89 was inserted to Civil Procedure Code. Likewise, various orders in
the first schedule to Civil Procedure Code were also amended and Rules 1-A, 1-B and 1-C of
order X were inserted. The researcher has restricted the study only with the provisions relating
to alternative disputes resolution with respect to the research topic in this research paper. The
Section 89 of Code of Civil Procedure lays down that where it appears to the Court that there
exists an element of settlement, which may be acceptable to the parties; the Court shall
formulate the terms of settlement and give time to the parties for their comments. On receiving

46
The Constitution (42nd amendment) Act,1976, S.8(w, e, f.3-1-77) Avtar
Singh, Law of Contract and Specific relief (2002), p280.
47
Central/States Civil Acts, Professional Book Publishers. (2005).
48
Telecom District Manager Goa Vs. Dempo & Co. (1996) 8 SCC 753.
 the response from the parties, the Court may formulate the possible settlement and refer to
25

either (i) arbitration (ii) conciliation (iii) Judicial Settlement including the settlement through
Lok Adalat or (iv) mediation. As per sub-section (2) of Section 89 as amended when a dispute
is referred to arbitration and conciliation, the provisions of Arbitration and Conciliation Act,
1996 shall apply. When the Court refers the dispute to Lok Adalat for settlement by an
Institution or person, the Legal Services Authorities Act, 1987 alone shall apply. It is only in
the case of mediation that the Court itself shall affect compromise and shall follow such
procedure as may be prescribed by Rules made by the High Court under Section 122 read with
Section 130 of the Code of Civil Procedure49. Rules 1-A, 1-B and 1-C of Order X deal with
different situations. These provisions are applicable where at the first hearing of the suit the
Court ascertains from each party or the counsel whether the parties admit or deny the
allegations of fact as are made in the plaint or the written statement. After referring to the
admissions and denials, the Court shall direct the parties to the suit to opt for either mode of
the alternative dispute Resolution methods as specified in Section 89 (1) i.e. Arbitration and
Conciliation, Lok Adalat or Mediation. The Supreme Court of India has clearly held that,
Section 89 does not obligate the Courts to conduct arbitration. However, it enables the Court
wherever it is satisfied with reference to the dispute in a pending suit that there is a possibility
of settlement either by way of arbitration or conciliation etc., the Court is required to refer the
same to the arbitration or conciliation, judicial settlement including settlement through Lok
Adalat’s or mediation50. In Rajasthan State Road Transport Co. Vs Nand Lal Sarawat 51 case,
the Rajasthan High Court held that, where parties agree for settlement of dispute before the
arbitrator, it is imperative for the Court to take steps for settlement of dispute. Where a dispute
has been referred for arbitration or conciliation, the provisions of the Arbitration and
Conciliation Act, 1996 shall apply as if the proceeding for arbitration or conciliation were
referred for settlement under the provision of that Act. Where a dispute has to be referred to
Lok Adalat, the Court shall refer the same to Lok Adalat in accordance with Section 20 (1) of
Legal services Authority Act 1987 and all the provision of that Act shall apply in respect of
the dispute so referred to the Lok Adalat. Where a matter which is referred to Lok Adalat in
terms of Section 89 (2), read with Section 20 of the Legal services Authorities Act, is settled,

49
Tandon, The Code of Civil Procedure,26th ed (2005) p,450-451.
50
K Venkulu Vs. State of Andhra Pradesh, A.I.R 2004 A.P.85.
51
A.I.R 2005 Raj 112 (113, 114)
 the refund of the Court fees is governed by Section 16 of Court Fees Act, read with Section
26

21 of the Legal Services Authorities Act, the plaintiff is entitled to the refund of the whole of
the Court fees paid 52. Legal Services Authority Act institutionalized the concept of resolution
of dispute through arbitration, mediation, conciliation and negotiation. The said Act provides
for holding Lok Adalat’s where disputes are pending before the Courts. It also provides for
settlement of disputes at pre-litigation stage. The Legal Services Authority (Amendment) Act,
2002 provides for a radical change. As regards disputes between the consumers and the
statutory bodies or public corporations providing public utilities, dispute at the pre-litigation
stage may be referred to a permanent Lok Adalat comprising of a judicial officer and experts
in the field. The permanent Lok Adalat would try to arrive at a conciliatory settlement but if
does not succeed; they may adopt an adjudicatory role. No appeal lies from such judgment,
which became an executable decree. Supreme Court of India held that, the award passed by
the Lok Adalat’s are executable like decree of Civil Courts and the same are non-appealable,
thus putting an end to litigation53.

ALTERNATIVE DISPUTE RESOLUTION MECHANISM

The alternative dispute resolution methods are not new to India and have been in existence in
some form or the other in the olden days. It is interesting to discover that the practice of settling
the dispute through community elders existed in India even before British Raj. It is only now
that there is universal acceptance and statutory recognition for such procedures to facilitate
early settlement of disputes on agreed terms. It was only after the Court system that was
predominantly adopted for resolution of disputes, the methods such as Arbitration, Mediation,
and Conciliation came to be treated as alternative means of resolving the disputes. A detailed
study of evolutionary history of Indian legal system establishing the above fact is done in
proceeding chapters of this study.

Alternative dispute Resolution methods are being increasingly acknowledged in the field of
law and commercial sectors both at National and International levels. Its diverse methods can

52
Vasudevan Vs. A.V State of Kerala AIR 2004 Ker 43 (45)
53
P.T. Thomas Vs. Thomas Job 2005 (6) S.C.C 486.
 help the parties to resolve their disputes at their own terms cheaply and expeditiously.
27

Alternative dispute Resolution techniques are in addition to the Courts in character. Alternative
dispute Resolution techniques can be used in almost all contentious matters, which are capable
of being resolved, under law, by agreement between the parties. Alternative dispute Resolution
techniques can be employed in several categories of disputes, especially civil, commercial,
industrial and family disputes54. Form the study of the different alternative dispute Resolution
techniques in the proceeding chapters it is found that, alternative dispute Resolution methods
offer the best solution in respect of commercial disputes where the economic growth of the
Country rests. The goal of ADR is enshrined in the Indian Constitution’s preamble itself, which
enjoins the State: “to secure to all the citizens of India, justice-social, economic, and political—
liberty, equality, and fraternity.”55

The Law Commission of Indian has maintained that, the reason for judicial delay is not a lack
of clear procedural laws, but rather the imperfect execution, or even utter non-observance,
thereof.56 The Law Commission of Indian in its 14th Report categorically stated that, the delay
results not from the procedure laid down by the legislations but by reason of the non-
observance of many of its important provisions particularly those intended to expedite the
disposal of proceedings. Given the huge number of pending cases, the governance and
administrative control over judicial institutions through manual processes has become
extremely difficult. The Supreme Court made it clear that this state of affairs must be
addressed: “An independent and efficient judicial system is one of the basic structures of our
Constitution…It is our Constitutional obligation to ensure that the backlog of cases is decreased
and efforts are made to increase the disposal of cases.”57

THE SCOPE OF ALTERNATIVE DISPUTE RESOLUTION.

Delay, in the justice delivery system with respect to both the civil or criminal justice is a
disturbing feature in the Courts of law. Alternative and consensual means of dispute resolution
are needed to reduce the backlog and delay in civil justice system. In the criminal justice
system, the criminal offences are regarded as a breach of State’s command. The State, as a

54
Hindu Marriage Act 1955, Industrial Disputes Act 1947, The Code of Civil Procedure, The Family
Courts Act 1984
55
The Preamble of Indian Constitution
56
Law Commission of India, 77th Report, pr.4.1.
57
Brij Mohan Lal Vs. Union of India & Others (2002-4-Scale-433), May 6, 2002.
 prosecuting party, cannot resort to arbitration, mediation and conciliation modes to reduce the
28

backlog of criminal cases. Nevertheless, a device for compounding is allowed under

Section320 of the Criminal Procedure Code. This section is limited with respect to the minor
and domestic offences, where by fulfilling the ends of criminal justice and stabilizing
orderliness in the society. For other crimes, the formal legal adjudication is the sole means and
last resort. In criminal trials the Supreme Court of India has laid down that, for fairness in the
criminal trial no procedure can be regarded as fair and just if it does not ensure a reasonable
quick trial. Expediency and fairness of trial are held by the Supreme Court58 as integral part of
Fundamental right to life and personal liberty enunciated in Article 21 of the constitution. The
litigation in this 21st Century needs active intervention of the judges, mediators, conciliators
and arbitrators to achieve speedy disposal of pending cases and reduce expenditure. In India,
The Arbitration and Conciliation Act, 1996 provides for legislative hold to the methods of
Arbitration and Conciliation as, alternative forms of resolving the disputes. The Indian
Supreme Court has interpreted that “social justice includes ‘legal justice,’ which means that
the system of administration of justice must provide a cheap, expeditious and effective
instrument for realization of justice by all section of the people irrespective of their social or
economic position or their financial resources.”59 Form the proceeding chapters of the study
dealing with historical evolution of the dispute resolution process it is evident that prior to the
advent of the British the laws in India were not codified. An in-depth study of the evolutionary
history, the provisions, the study of actual functioning of the Arbitration and Conciliation Act,
1996 and the allied facts are dealt with, in succeeding chapter of this thesis.
The time has come for the public at large to understand and adopt the current fact that, there is
a global trend of shifting towards alternative methods of dispute Resolution mechanisms like
arbitration, conciliation, negotiation and mediation from that of the predominately-adopted
form of adjudication of disputes by the Courts of law. A settlement agreement arrived at among
the disputants has the same status and effect as if it is an arbitral award on agreed terms and it
is final and binding on them. This chapter dealt with the conceptual analysis of the terms
dispute, the problem of judicial arrears and backlog of cases, different dispute resolution
mechanisms and so forth. To tackle with problems of judicial delays and arrears, all the Courts
and members of the Bar as well as the litigants will have to realize that, there exists a problem

58
Hussainara Khatoon Vs State of Bihar ,1979 CrLJ 1036
59
Babu Vs. Raghunathji AIR 1976 SC 1734
 of judicial delays and arrears and the problem is to be dealt with efficiency and fast track
29

manner. One of the ways of finding the solution to the problem is to conduct extensive research
and publications in that field. The researcher has tried to study the different types of dispute
Resolution methods in the subsequent chapters, the unique characteristics of the different
dispute Resolution methods functioning in other countries in order to find a solution as to, can
the adoption of different process of dispute resolution, function successfully as alternative
dispute Resolution methods. It the need of the time, hence the study of the ADR methods that
can be introduced and adopted with necessary amendments according to the circumstances for
reducing the problem of judicial arrears before the Courts.

CURRENT LAWS-ARBITRATION AND CONCILIATION ACT, 1996

With a view to give effect the law relating to domestic arbitration, international commercial
arbitration, enforcement of foreign awards and to define the law relating to conciliation, the
Arbitration and Conciliation Bill 199560 was introduced in the Rajya Sabha on 16th May 1995.
The Arbitration and Conciliation Act, 199661 received the Presidential assent and was brought
into force from 16 August 199662, the Act being a continuation of the Ordinance is deemed
to have been effective from 25 January 1996 when the first Ordinance came into force.63 The
long title of this Act replicates that, the object of the Act is to consolidate and amend the law
relating to domestic arbitration, international commercial arbitration and enforcement of
foreign arbitral awards as also to define the law relating to conciliation and for matters
connected therewith or incidental thereto.

The Arbitration and Conciliation Act, 1996 repealed the Arbitration Act of 1940, the
Arbitration (Protocol and Convention) Act of 1937 and the Foreign Awards (Recognition and
Enforcement) Act of 1961.
The Arbitration and Conciliation Act, 1996 is divided into following parts:
 Part I deals with the “Domestic arbitration”.

 Part II deals with the “Enforcement of foreign awards”.

 Part III deals with the “Conciliation procedures”.

60
Bill No.30 of 1995.
61
The Arbitration and Conciliation Act, 1996. (No. 26 of 1996).
62
Notification No. GSR 375 (E) published in the Gazette of India, Extraordinary, Pt II
63
Fuerst Day Lawson Ltd. Vs. Jindal Exports Ltd. (2001)6 SCC 356.
  Part IV of the Act deals with the “Supplementary provisions”.
30

T h e Act has three Schedules namely,

 The First Schedule on the Convention on recognition and enforcement of foreign

arbitral award as per New York convention.

 The Second Schedule on the Protocol on Arbitration clauses.

 The Third Schedule on the convention on the execution of foreign arbitral awards as
per Geneva Convention.

SALIENT FEATURES OF THE ARBITRATION AND CONCILIATION ACT, 1996

The Arbitration and Conciliation Act, 199664 lay considerable stress on the party autonomy.
The party to the dispute can decide the number of arbitrators, the rules of procedure, and the
rules governing the substance of the dispute, the place of arbitration and the language of the
arbitrators. The major advantage of the new law is that, it facilitates quick resolution of the
commercial disputes and speeds up arbitration procedure by minimizing intervention by the
Court. Under the new law, a Court may provide certain interim measures of protection at a
party’s request and may offer assistance in taking evidence or recovering documents at the
request of the arbitral tribunal or a party to the reference. The award of an arbitrator is itself
enforceable as a decree of Court and is not required to be made a “Rule of Court”. The arbitrator
has to give reasons for his award. However, no reasons need to be given if the disputant parties
agree beforehand to such a thing.

PREAMBLE

Preamble to the 1996 Act is an introductory, prefatory and an explanatory note about the
sections namely that of the Arbitration and Conciliation Act, 1996. United Nations Commission
on International Trade Law (UNCITRAL) adopted the UNCITRAL Model Law on
International Commercial Arbitration in 1985. Thereby, the General Assembly of the United
Nations recommended that all countries give due consideration to the said Model Law, in view
of the desirability of uniformity of the law of arbitral procedures and the specific needs of

64
The Arbitration and Conciliation Act, 1996 herein after referred to as “1996 Act”
 international commercial arbitration practice.
31

The United Nations Commission on International Trade Law has adopted the UNCITRAL
Conciliation Rules in 1980. Thereby, the General Assembly of the United Nations
recommended the use of the said Rules in cases where a dispute arises in the context of
international commercial relations and the parties seek an amicable settlement of that dispute
by recourse to conciliation.
The said Model Law and Rules has a significant contribution to the establishment of a unified
legal framework for the fair and efficient settlement of disputes arising in international
commercial relations.
Based on the above facts the Parliament of India considered that it was expedient to make law
with respect to arbitration and conciliation, taking into account the aforesaid Model Law and
Rules in the forty- seventh year of the Republic.
The process of ‘Conciliation’ and ‘Mediation’ is distinguishable from Arbitration as the
disputed party’s willingness to submit to mediation or conciliation does not bind them to accept
the recommendation of the conciliation or mediator but an arbitrator’s award, by contrast, is
binding on the parties.65
The Hon’ble Supreme Court in Fuerst Day Lawson Ltd Vs. Jindal Exports Ltd66 held that the
provisions of the Arbitration and Conciliation Act, 1996 have to be interpreted and construed
independent to that the Arbitration and Conciliation Act, 1940. In order to get any further help
in construing the provisions, it is more relevant to refer to the United Nations Commission on
International Trade Law.
In Konkan Railways Corp. Ltd. Vs. Mehul Construction Company67, Supreme Court of India
stated that the Arbitration and Conciliation Act, 1996 was introduced in order to attract the
‘international mercantile community’ and at the time of interpretation, regard must be had to
the objectives behind the enactment of the Act.
In Babar Ali Vs. Union of India68, it was held by Supreme Court that, The Arbitration and
Conciliation Act,1996 is neither unconstitutional nor in any way offends the basic structure of
the Constitution of India, as Judicial review is available for challenging the award in accordance

65
Robert Merkin, Arbitration Law edn 2004, p 168, para 6.6.
66
A.I.R. 2001 S.C.2293; Sundaram Finance Ltd Vs. NEPC India Ltd., AIR 1999 S.C 565.
67
(2000) 7 SCC 201.
68
(2000) 2 SCC 178
 with the procedure laid down therein. The time and manner of the judicial scrutiny can be
32

legitimately laid down by the Act passed by the parliament.

The MM Acqua Technologies Ltd Vs. Wig Brothers Builders Ltd69 case helps in explaining the
definition of a binding agreement between parties. In order to be a binding arbitration agreement
between the parties, the same must be in writing and the parties should have specifically agreed
to settle their disputes by arbitration. An arbitration agreement cannot be inferred by
implication.

69
2001(3) RAJ 531 (Del).
 DIFFERENT TYPES OF ALTERNATIVE DISPUTE
33

RESOLUTIONS

The most common types of ADR for civil cases are Arbitration, Conciliation, Mediation,
Judicial Settlement and Lok Adalat.

In India, the Parliament has amended the Civil Procedure Code by inserting Section 89 as well
as Order 10 Rule 1-A to 1-C. Section 89 of the Civil Procedure Code provides for the settlement
of disputes outside the Court. It is based on the recommendations made by the Law
Commission of India and Malimath Committee. It was suggested by the Law Commission of
India that the Court may require attendance of any party to the suit or proceedings to appear in
person with a view to arriving at an amicable settlement of dispute between the parties and
make an attempt to settle the dispute between the parties amicably. Malimath Committee
recommended to make it obligatory for the Court to refer the dispute, after issues are framed,
for settlement either by way of Arbitration, Conciliation, Mediation, Judicial Settlement
through Lok Adalat. It is only when the parties fail to get their disputes settled through any of
the alternate disputes resolution method that the suit could proceed further. In view of the
above, new Section 89 has been inserted in the Code in order to provide for alternative dispute
resolution.

It is worthwhile to refer Section 89 of the Civil Procedure Code, which runs as follows: -

Sec. 89. Settlement of disputes outside the court. –

(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.
 (2) where a dispute has been referred –
34

(a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996
(26 of 1996) shall apply as if the proceedings for arbitration or conciliation were referred for
settlement under the provisions of that Act;

(b) to Lok Adalat, the Court shall refer the same to the Lok Adalat in accordance with the
provisions of sub-section (1) of section 20 of the Legal Services Authority Act, 1987 (39 of
1987) and all other provisions of that Act shall apply in respect of the dispute so referred to the
Lok Adalat;

(c) for judicial settlement, the Court shall refer the same to a suitable institution or person and
such institution or person shall be deemed to be a Lok Adalat and all the provisions of the Legal
Services Authority Act, 1987 (39 of 1987) shall apply as if the dispute were referred to a Lok
Adalat under the provisions of that Act;

(d) for mediation, the Court shall effect a compromise between the parties and shall follow
such procedure as may be prescribed."

On perusal of the aforesaid provisions of Section 89, it transpires that it refers to five types of
ADR procedures, made up of one adjudicatory process i.e. arbitration and four negotiatory i.e.
non-adjudicatory processes such as Conciliation, Mediation, Judicial Settlement and Lok
Adalat. The object behind Section 89 is laudable and sound. Resort to ADR process is
necessary to give speedy and effective relief to the litigants and to reduce the pendency in and
burden upon the Courts.

Of course, Section 89 has to be read with Rule 1-A of Order 10, which runs as follows: -

Order 10 Rule 1-A. Direction of the Court to opt for any one mode of alternative dispute
resolution. --After recording the admissions and denials, the Court shall direct the parties to the
suit to opt either mode of the settlement outside the Court as specified in sub- section (1) of
section 89. On the option of the parties, the Court shall fix the date of appearance before such
forum or authority as may be opted by the parties.

Order 10 Rule 1-B. Appearance before the conciliatory forum or authority. --Where a suit is
referred under rule 1A, the parties shall appear before such forum or authority for conciliation
of the suit.
 Order 10 Rule 1-C. Appearance before the Court consequent to the failure of efforts of
35

conciliation.--Where a suit is referred under rule 1A and the presiding officer of conciliation
forum or authority is satisfied that it would not be proper in the interest of justice to proceed
with the matter further, then, it shall refer the matter again to the Court and direct the parties to
appear before the Court on the date fixed by it.

On joint reading of Section 89 read with Rule 1-A of Order 10 of Civil Procedure Code, it
transpires that the Court to direct the parties to opt for any of the five modes of the Alternative
Dispute Resolution and on their option refer the matter.

Thus, the five different methods of ADR can be summarized as follows: -

1. Arbitration

2. Conciliation

3. Mediation

4. Negotiation

5. Lok Adalat

ARBITRATION

The Indian law of arbitration is contained in the Arbitration and Conciliation Act 1996 (Act).
The Act is based on the 1985 UNCITRAL Model Law on International Commercial Arbitration
and the UNCITRAL Arbitration Rules 1976. The Statement of Objects and Reasons of the Act
recognises that India’s economic reforms will become effective only if the nation’s dispute
resolution provisions are in tune with international regime. The Statement of Objects and
Reasons set forth the main objectives of the Act as follows:
“i) to comprehensively cover international and commercial arbitration and conciliation as also
domestic arbitration and conciliation;
ii) to make provision for an arbitral procedure which is fair, efficient and capable of meeting
the needs of the specific arbitration;
iii) to provide that the arbitral tribunal gives reasons for its arbitral award;
iv) to ensure that the arbitral tribunal remains within the limits of its jurisdiction;
v) to minimise the supervisory role of courts in the arbitral process;
 vi) to permit an arbitral tribunal to use mediation, conciliation or other procedures during the
36

arbitral proceedings to encourage settlement of disputes;

vii) to provide that every final arbitral award is enforced in the same manner as if it were a
decree of the court;
viii) to provide that a settlement agreement reached by the parties as a result of conciliation
proceedings will have the same status and effect as an arbitral award on agreed terms on the
substance of the dispute rendered by an arbitral tribunal;
and ix) to provide that, for purposes of enforcement of foreign awards, every arbitral award
made in a country to which one of the two International Conventions relating to foreign arbitral
awards to which India is a party applies, will be treated as a foreign award.”

SCHEME OF THE ACT

The Act is a composite piece of legislation. It provides for domestic arbitration; international
commercial arbitration; enforcement of foreign award and conciliation (the latter being based
on the UNCITRAL Conciliation Rules of 1980).
The more significant provisions of the Act are to be found in Part I and Part II thereof. Part I
contains the provisions for domestic and international commercial arbitration in India. All
arbitration conducted in India would be governed by Part I, irrespective of the nationalities of
the parties. Part II provides for enforcement of foreign awards.
Part I is more comprehensive and contains extensive provisions based on the Model Law. It
provides inter alia for arbitrability of disputes; non-intervention by courts; composition of the
arbitral tribunal; jurisdiction of arbitral tribunal; conduct of the arbitration proceedings;
recourse against arbitral awards and enforcement. Part II on the other hand, is largely restricted
to enforcement of foreign awards governed by the New York Convention or the Geneva
Convention. Part II is thus, (by its very nature) not a complete code. This led to judicial
innovation by the Supreme Court in the case of Bhatia International Vs. Bulk Trading70 . Here
the Indian court’s jurisdiction was invoked by a party seeking interim measures of protection
in relation to an arbitration under the ICC Rules to be conducted in Paris. The provision for
interim measure (section 9) was to be found in Part I alone (which applies only to domestic

70
(2002) 4 SCC 105 (‘Bhatia’).
 arbitration). Hence the Court was faced with a situation that there was no proprio vigore legal
37

provision under which it could grant interim measure of protection. Creatively interpreting the
Act, the Supreme Court held that the “general provisions” of Part I would apply also to offshore
arbitrations, unless the parties expressly or impliedly exclude applicability of the same. Hence
by judicial innovation, the Supreme Court extended applicability of the general provisions of
Part I to off-shore arbitrations as well. It may be stated that this was premised on the assumption
that the Indian Court would otherwise have jurisdiction in relation to the matter (in the
international sense). This became clear in a subsequent decision of the Supreme Court in
Shreejee Traco (I) Pvt. Ltd. Vs. Paperline International Inc.71 Here the Court’s assistance was
sought for appointing an arbitrator in an offshore arbitration. The power of appointment by
court exists under Section 11 of Part I of the Act. The Court declined to exercise jurisdiction.
It found that the arbitration was to be conducted in New York and that the law governing the
arbitration proceedings would be the law of seat of the arbitration. Hence, the extension of Part
I provisions to foreign arbitrations sanctified by Bhatia72 could not be resorted to in every case.
The Indian Courts would have to first determine if it has jurisdiction, in the international sense.

SUBJECT MATTER OF ARBITRATION

Any commercial matter including an action in tort if it arises out of or relates to a contract can
be referred to arbitration. However, public policy would not permit matrimonial matters,
criminal proceedings, insolvency matters anti-competition matters or commercial court matters
to be referred to arbitration. Employment contracts also cannot be referred to arbitration but
director - company disputes are arbitrable (as there is no master servant relationship here) 73.
Generally, matters covered by statutory reliefs through statutory tribunals would be non-
arbitrable.

ROLE OF THE COURT

71
(2003) 9 SCC 79
72
supra
73
Comed Chemicals Ltd. Vs. C.N. Ramchand 2008 (13) SCALE 17
 One of the fundamental features of the Act is that the role of the court has been minimised.
38

Accordingly, it is provided that any matter before a judicial authority containing an arbitration
agreement shall be referred to arbitration (Section 8 provided the non - applicant objects no
later than submitting its statement of defence on merits). Further, no judicial authority shall
interfere, except as provided for under the Act (Section 5). In relation to arbitration
proceedings, parties can approach the Court only for two purposes: (a) for any interim measure
of protection or injunction or for any appointment of receiver etc.; or (b) for the appointment
of an arbitrator in the event a party fails to appoint an arbitrator or if two appointed arbitrators
fail to agree upon the third arbitrator. In such an event, in the case of domestic arbitration, the
Chief Justice of a High Court may appoint an arbitrator, and in the case of international
commercial arbitration, the Chief Justice of the Supreme Court of India may carry out the
appointment. A court of law can also be approached if there is any controversy as to whether
an arbitrator has been unable to perform his functions or has failed to act without undue delay
or there is a dispute on the same. In such an event, the court may decide to terminate the
mandate of the arbitrator and appoint a substitute arbitrator.

JURISDICTION OF ARBITRATORS

The Act provides that the arbitral tribunal may rule on its own jurisdiction, including any
objections with respect to the existence or validity of the arbitration agreement. The arbitration
agreement shall be deemed to be independent of the contract containing the arbitration clause,
and invalidity of the contract shall not render the arbitration agreement void. Hence, the
arbitrators shall have jurisdiction even if the contract in which the arbitration agreement is
contained is vitiated by fraud and/or any other legal infirmity. Further, any objection as to
jurisdiction of the arbitrators should be raised by as party at the first instance, i.e., either prior
to or along with the filing of the statement of defence. If the plea of jurisdiction is rejected, the
arbitrators can proceed with the arbitration and make the arbitral award. Any party aggrieved
by such an award may apply for having it set aside under Section 34 of the Act. Hence, the
scheme is that, in the first instance, the objections are to be taken up by the arbitral tribunal and
in the event of an adverse order, it is open to the aggrieved party to challenge the award.
 In SBP & Co. Vs. Patel Engg Ltd.74 the Supreme Court of India (in a decision rendered by a
39

Bench of Seven Judges) held that the nature of power conferred on the Court under Section 11
of the Act is judicial (and not administrative) in nature. Accordingly, if parties approach the
Court for appointment of arbitral tribunal (under Section 11) and the Chief Justice pronounces
that he has jurisdiction to appoint an arbitrator or that there is an arbitration agreement between
the parties or that there is a live and subsisting dispute to be referred to arbitration and the Court
constitutes the Tribunal as envisaged, this would be binding and cannot be re-agitated by the
parties before the arbitral tribunal.
In S.B.P & Co. case the Supreme Court has defined what exactly the Chief Justice, approached
with an application under Section 11 of the Act, is to decide at that stage. The Chief Justice has
the power to decide his own jurisdiction in the sense whether the party making the motion has
approached the right court. He has to decide whether there is an arbitration agreement, as
defined in the Act and whether the person who has made the request before him, is a party to
such an agreement. He can also decide the question whether the claim was a dead one; or a
long-barred claim that was sought to be resurrected and whether the parties have concluded the
transaction by recording satisfaction of their mutual rights and obligations or by receiving the
final payment without objection.
The Court in SBP & Co case, inter alia, concluded as follows:
(i) The power exercised by the Chief Justice of the High Court or the Chief Justice of
India under Section 11(6) of the Act is not an administrative power. It is a judicial
power.
(ii) ii) The power under Section 11(6) of the Act, in its entirety, could be delegated, by the
Chief Justice of the High Court only to another Judge of that Court and by the Chief
Justice of India to another Judge of the Supreme Court.
(iii) In case of designation of a Judge of the High Court or of the Supreme Court, the power
that is exercised by the designated Judge would be that of the Chief Justice as conferred
by the statute.
(iv) The Chief Justice or the designated Judge will have the right to decide the preliminary
aspects as indicated in the judgment. These will be, his own jurisdiction to entertain
the request, the existence of a valid arbitration agreement, the existence or otherwise
of a live claim, the existence of the condition for the exercise of his power and on the
qualifications of the arbitrator or arbitrators. The Chief Justice or the designated Judge

74
(2005) 8 SCC 618
 would be entitled to seek the opinion of an institution in the matter of nominating an
40

arbitrator qualified in terms of Section 11(8) of the Act if the need arises but the order
appointing the arbitrator could only be that of the Chief Justice or the designated Judge.
(v) The District Judge does not have the authority under Section 11(6) of the Act to make
appointment of an arbitrator.
(vi) The High Court cannot interfere with the orders passed by the arbitrator or the Arbitral
Tribunal during the course of the arbitration proceedings and the parties could approach
the Court only in terms of Section 37 of the Act (appealable orders) or in terms of
Section 34 of the Act (setting aside or arbitral award).
(vii) Since it is a judicial order, an appeal will lie against the order passed by the Chief
Justice of the High Court or by the designated Judge of that Court only under Article
136 of the Constitution to the Supreme Court
(viii) No appeal shall lie against an order of the Chief Justice of India or a Judge of the
Supreme Court designated by him while entertaining an application under Section
11(6) of the Act.

CONDUCT OF PROCEEDINGS

The arbitrators are masters of their own procedure and subject to party’s agreement, may
conduct the proceedings “in the manner they consider appropriate.” This power includes- “the
power to determine the admissibility, relevance, materiality and weight of any evidence”. The
only restrain on them is that they shall treat the parties with equality and each party shall be
given a full opportunity to present his case, which includes sufficient advance notice of any
hearing or meeting. Neither the Code of Civil Procedure nor the Indian Evidence Act applies
to arbitrations. Unless the parties agree otherwise, the tribunal shall decide whether to hold
oral hearings for the presentation of evidence or for arguments or whether the proceedings
shall be conducted on the basis of documents or other material alone. However, the arbitral
tribunal shall hold oral hearings if a party so requests (unless the parties have agreed that no
oral hearing shall be held).
Arbitrators have power to proceed exparte where the respondent, without sufficient cause,
fails to communicate his statement of defence or appear for an oral hearing or produce
evidence. However, in such situation the tribunal shall not treat the failure as an admission of
the allegations by the respondent and shall decide the matter on the evidence, if any, before it.
 If the claimant fails to communicate his statement of the claim, the arbitral tribunal shall be
41

entitled to terminate the proceedings.

FORMS AND CONTENTS OF AWARD

The arbitrators are required to set out the reasons on which their award is based, unless the
parties agree that no reasons are to be given or if it arises out of agreed terms of settlement.
The tribunal may make an interim award on matters on which it can also make a final award.
Indian law provides for a very healthy 18% interest rate on sums due under an award. Thus,
unless the arbitral tribunal directs otherwise, the award will carry interest at 18% per annum
from the date of the award till the date of payment. The tribunal is free to award costs, including
the cost of any institution supervising the arbitration or any other expense incurred in
connection with the arbitration proceedings.

SETTING ASIDE OF AWARDS

The grounds for setting aside an award rendered in India (in a domestic or international
arbitration) are provided for under Section 34 of the Act. These are materially the same as in
Article 34 of the Model Law for challenging an enforcement application. An award can be set
aside if:
a) a party was under some incapacity; or
b) the arbitration agreement was not valid under the governing law; or
c) a party was not given proper notice of the appointment of the arbitrator or on the arbitral
proceedings; or
d) the award deals with a dispute not contemplated by or not falling within the terms of
submissions to arbitration or it contains decisions beyond the scope of the submissions; or
e) the composition of the arbitral tribunal or the arbitral procedure was not in accordance with
the agreement of the parties; or
f) the subject matter of the dispute is not capable of settlement by arbitration; or
 g) the arbitral award is in conflict with the public policy of India.
42

A challenge to an award is to be made within three months from the date of receipt of the
same. The courts may, however, condone a delay of maximum 30 days on evidence of
sufficient cause. Subject to any challenge to an award, the same is final and binding on the
parties and enforceable as a decree of the Court.
Considerable controversy has been generated as to whether an award is liable to be challenged
under Section 34 on merits. The earlier view, as expounded by the Supreme Court in Renu
Sagar Power Co. Ltd. Vs. General Electric Co.75 was that an award could be set side if it is
contrary to the public policy of India or the interests of India or to justice or morality – but not
on the grounds that it is based on an error of law or fact. The Supreme Court in that case was
faced with the issue to determine the scope of public policy in relation to proceedings for
enforcement of a foreign award under the Foreign Awards (Recognition and Enforcement)
Act, 1961. The Court also held that in proceedings for enforcement of a foreign award the
scope of enquiry before the court in which the award is sought to be enforced would not entitle
a party to the said proceedings to impeach the award on merits.
However, in a later Supreme Court of India decision in Oil and Natural Gas Corporation vs.
Saw Pipes76 the Court added an additional ground of “patent illegality”, thereby considerably
widening the scope of judicial review on the merits of the decision. In Saw Pipes case the court
accepted that the scheme of Section 34 which dealt with setting aside the domestic arbitral
award and Section 48 which dealt with enforcement of foreign award were not identical. The
court also accepted that in foreign arbitration, the award would be subject to being set aside or
suspended by the competent authority under the relevant law of that country whereas in
domestic arbitration the only recourse is to Section 34.
The Supreme Court observed:
“But in a case where the judgment and decree are challenged before the Appellate Court or the
Court exercising revisional jurisdiction, the jurisdiction of such Court would be wider.
Therefore, in a case where the validity of award is challenged there is no necessity of giving a
narrower meaning to the term 'public policy of India'. On the contrary, wider meaning is
required to be given so that the 'patently illegal award' passed by the arbitral tribunal could be
set aside. Similarly, if the award is patently against the statutory provisions of substantive law
which is in force in India or is passed without giving an opportunity of hearing to the parties

75
(1994) Supp (1) SCC 644
76
(2003) 5 SCC 705
 as provided under Section 24 or without giving any reason in a case where parties have not
43

agreed that no reasons are to be recorded, it would be against the statutory provisions. In all
such cases, the award is required to be set aside on the ground of 'patent illegality'.”
The court in Saw Pipes case although adopted the wider meaning to the term ‘public policy’
but limited its application to domestic awards alone. The Saw Pipes case has generated some
controversy, and it remains to be seen if it will stand the test of time.
The position of a foreign award has also undergone some recent controversy. A foreign award
is enforceable under Part II of the Act if it is rendered in a country that is a signatory to the
New York Convention or Geneva Convention and that territory is notified by the Central
Government of India. Once an award is held to be enforceable it is deemed to be a decree of
the court and can be executed as such. Under the Act there is no procedure for setting aside a
foreign award. A foreign award can only be enforced or refused to be enforced but it cannot be
set aside.

MEDIATION

Mediation is a fundamental procedure for resolving controversies. It is a process in which a

neutral intervener called the mediator assists two or more negotiating parties, to identify
matters of concern, develop a better understanding of their situation, and, based upon that
improved understanding, develop mutually acceptable proposals to resolve those concerns.
Thus, Mediation can be said to embraces the philosophy of democratic decision-making.
The process of mediation can be ‘evaluative’ as well as ‘facilitative’. Henry J. Brown and
Arthur L. Mariot say that ‘mediation’ is a facilitative process in which “disputing parties
engage the assistance of an impartial third party, the mediator, who helps them to try to arrive
at an agreed resolution of their dispute. The mediator has no authority to make any decisions
that are binding on them, but uses certain procedures, techniques and skills to help them to
negotiate an agreed resolution of their dispute without adjudication.”
The process of mediation incurs minimal procedural and evidentiary requirements while
providing unlimited opportunity for the parties to exercise flexibility in communicating their
underlying concerns and priorities regarding the dispute.” 77 Thus, mediation can be practiced

77
Brien Wassner, A Uniform National System of Mediation in the United States: Requiring National
Training Standards and Guidelines for Mediators and State Mediation Programs, 4 Cardozo Online
J. Conflict Resol. 3 (2002)
 in various ways. For example, in the United States of America, the purest of its form is still
44

considered to be facilitative. Undoubtedly, many practitioners and scholars differ on the “role”
of mediator in mediation. One view is that the process of resolving disputes shall be called
mediation only if the mediator limits his or her role to that of a facilitator. Whereas in the
evaluative method, the mediator assumes more control of the process and the parties may be
ordered to participate in a particular way that may influence the outcome of the process.
Moreover, from the standpoint of the Court's responsibilities, the use of mediation reduces the
heavy caseload so common with litigation.78 The disputes referred to mediation can be settled
in accordance with reason, equity, and the actual circumstances of the case.79 Both equity and
mediation offer a form of "individualised justice" unavailable in the official legal system.
However, through the mediation process a resolution or result to the dispute can be achieved
without a right-wrong determination and without a factual finding.80Thus, mediation when
adopted as alternative dispute Resolution method helps in dissolving bitterness and rivalry and
creates the circumstance, which helps in the amicable development of the concept peace and
unity through the win situation among the disputants.

MEDIATOR

“Mediator” is a neutral third party who facilitates the disputing parties in arriving at a win-win
settlement for both of them. The mediator assists and guides the parties toward their own
solution by helping them to define the important issues and understand each other's interests.
The mediator focuses each side on the crucial factors necessary for settlement and on the
consequences of not settling. The mediator does not decide the outcome of the case and cannot
compel the parties to settle81.

78
Kwang-Taeck Woo, A Comparison of Court-Connected Mediation in Florida and Korea, 22 Brook.
J. Int'l L. 605, 606 (1997).
79
Yong Kuk Chang, Minsa Chojeong Chedoeui Hyunhwangkwa Daichaik, Present and Future of Civil
Mediation 14 Minsa Panryae Yeonku (Study of Civil Cases) 521 (1992).
80
Kimberlee Kovach, teaching a New Paradigm: Must Knights Shed their Swords and Armor to
Enter Certain ADR Arenas? 1 Cardozo Online J. Confl. Resol. 3 (2000)
81
Tom Arnold, Mediation outline, A practical guide for the Mediator and attorneys. (1988) p-11-56
 The mediator can defuse hostile attitudes and remedy miscommunications. The mediator is a
45

mirror of reality, which can help soften or eliminate extreme negotiating positions. Through
the mediator, parties assess the weaknesses in their own case and recognise potential strengths
of the other side. The parties can more clearly view matters previously distorted by anger and
emotion.
Mediator in general is a knowledgeable person with respect to the subject matter of the
controversies. Within the privacy of the caucus, mediators can help each party analyses the
strengths and weaknesses of their complete case. Most significantly, the mediator can explore
creative and innovative solutions that the parties who are caught up in adversarial negotiations
might never contemplate. The mediator does not impose a solution but rather works with the
parties to create their own solution, this characteristic of mediation differentiates it from other
forms of dispute resolution processes and principally, with that of the process of arbitration and
litigation.

THE TASKS OF THE MEDIATOR

The mediator has to play a very significant role in the process of Mediation. Mediator is not
responsible for the content of any resolution or agreement, but only for the way it is arrived at.
Mediator helps the parties to think through and state their own views of the problem and their
own preferred solutions. Mediator ensures that all the parties have an equal chance to think
through and state their own views of the problem. Mediator may challenge these initial
explorations as appropriate. Mediator explores and tests possible agreement with the parties
separately and together. Mediator can help if asked with the preliminary drafting of any
agreement. Mediator helps if asked with the drafting of any feedback to the institution designed
to assist it to avoid similar disputes in future. Mediations protect the 'safe place' by means of a
pre-mediation agreement. One of its features is an agreement that whatever takes place or is
said in the mediation will have to be confidential. It is subject to the recognition by everyone
involved in the process that, if it emerges that there has been criminal activity confidentiality
cannot be maintained. The pre-mediation agreement is separate from any agreement arrived at
 as a result of the mediation, and it is for the parties to decide whether all or part of what is
46

agreed is to remain confidential82.

THE MEDIATION PROCESS

There is no definite procedure to be adopted by the mediator for conducting mediation. Stephen
B. Goldberg, Frank E.A. Sander and Nancy H. Rogers had highlighted this fact by saying that,
depending on the terms of agreement, the mediator may attempt to encourage exchange of
information, provide new information, and help the parties to understand each other’s views.
Mediator can let the parties know that their concerns are understood and thereby promote a
productive level of emotional expression. He has to deal with the differences in perceptions
and interest between negotiations and constituents (including lawyer and client). This will help
the negotiators realistically assess the alternatives to settlement and learn about those interests,
which the parties are reluctant to disclose to each other. This is often possible in separate
sessions with each party to the dispute. Thereby the mediator invents solutions that meet the
fundamental interests of all parties to the dispute.
The parties may agree on the procedure to be followed by the mediator in the conducting the
meditation proceeding. If the parties do not agree on any particular procedure to be followed,
the mediator follows the procedure, which shall be guided by the principles of fairness and
justice, having regard to the rights and obligations of the parties, usages of trade, if any, and
the circumstances of the dispute.
The process of mediation generally starts with one of the disputing party suggesting for
mediation or if there is a mediation clause in the agreement then the disputed parties go for
mediation by selecting one mediator by consent or each party selecting a mediator and the two
select a third mediator. The parties can also choose an institute for mediation, which will have
a panel of mediators, and the parties can make the appointment or the institute itself from
among the names on the panel selects a mediator. Where a Court directs the mediation, the
Court will on its own, or the body handling Court referrals for mediation will appoint the
mediator.

82
Tweeddal & Tweeddale, Arbitration of Commercial Disputes, International and English Law and Practice, 1st
edn,2005, p6.
 The participation in the process of mediation is a voluntary process and requires the consent of
47

the parties to come to the mediation table and in participate in the process mediation. If, at any
time, a party feels that its interest is not served by the process or the party is in any way
uncomfortable with the mediator, the party may terminate its participation at the mediation
without any adverse consequences. The mediator and the parties select a mutually convenient
date and location for the mediation. Subject to the availability of the participants, meetings can
be conducted in person, by telephone, video conference, or any other method agreeable to the
parties and the mediator. The parties will be responsible for charges incurred in dispute
resolution process83.
The process of mediation can follow a general procedure that is, at first, the mediator receives
from each party a brief summary of the case. At the first session, each party can make an
opening statement giving its version. It can help in venting of their felling and enable each
party to understand the point of the other. The process can start with establishing the basic facts
of the dispute, identifying the issues for resolution, getting parties to be realistic about their
case. The issues needing resolution can thereby be clarified.
Thereafter the mediator can start communicating with the parties. This could be in joint
sessions with all the parties or in separate sessions with each party at a time. In these sessions’
mediator can focus parties on their long-term interests, as distinct from the position they have
taken in the dispute. Long-term interests usually dictate that parties should adopt harmonious
method of resolving dispute. These steps can make the parties to get more realistic about the
strengths and the weaknesses of their case. This shows up the facts that are not in a party’s
favour, difficulties of proving matters asserted as facts, and those statutes and case law, which
may not support their stand. At this stage, disputants can become more amenable to settlement
after seeing the problem with their case84.Thereby making the parties examine their alternatives
in reaching at a mediated settlement. The mediator can then encourage the parties to come up
with options for settlement, assuring them that they have full freedom to put out whatever
suggestions they like, that this is like a brainstorming session. Putting an idea on the table will
not mean a commitment has been given or the disputing parties make a binding statement. This
liberty enables many different ideas for solution to emerge. The mediator then makes the parties
focus on these lines of solutions, which have opened up by then. The energies are focused on

83
Tweeddal & Tweeddale, Arbitration of Commercial Disputes, International and English Law and
Practice, 1st edn,2005, p6
84
Brown and Marriott, ADR Principles and Practice, Second edn,1999, p127.
 these ideas for possible settlement. Now and again, it will be necessary for the mediator to
48

remind the disputing parties of the reasons why it is beneficial for them to reach agreement at
the mediation table. Giving the parties the freedom to create options for settlement, and refining
their suggestion. Once consensus is reached, the mediator can then ensure that it is properly
reflected in the written agreement, which loose ends are tied up, that a proper review
mechanism is put in place, if necessary. On reaching for an agreement of settlement between
the disputed parties and the mediator and the parties can sign it and the mediator can thereby
declares the mediation closed. Once the settlement agreement is signed, it is final and binding
on the parties. The process of mediation can also end if a party withdraws from the mediation
or in case where all the parties agree that, the mediation is unsuccessful and in cases where the
mediator terminates the mediation as unsuccessful.

THE TYPES OF DISPUTES NOT SUITABLE FOR MEDIATION

The attempt to arrive at an interests-based resolution through mediation may not be the best
approach in each and every kind of dispute arising between the parties. The process of
mediation is not a way for resolving a dispute if there is a matter of policy at stake, if there is
an issue on which it is desirable to establish a precedent, if there are legal restrictions as statutes
impose restrictions on its actions and on a point, which is 'non-negotiable' for the complainant.
Where order of the Court is necessary to enforce a right and where an interpretation of a law is
called for, in cases of serious criminal offences, mediation is not a possible dispute resolution
method. Where there is a statutory violation and, in the cases, where not all the parties are
willing to make the 'voluntary' attempt towards resolving the issues mediation will be
unsuccessful.
If a party is acting in bad faith, for example, trying to give the appearance of 'having tried' to
avoid the displeasure of a Court or to comply with a mandatory or contractual requirement to
attempt mediation, in such cases also the purpose will not be solved. If there are, going to be
consequences that are detrimental to those not involve or in other words, will be unfair to them
by comparison with that of other dispute Resolution methods, in such cases the process of
mediation will not serve the purpose and thus cannot emerge as a successful alternative to that
of litigation in resolving disputes. Criminal matters (other than those under Section 498A
 Indian Penal Code, Section 125 Code of Criminal Procedure and Section 138 Negotiable
49

Instruments Act) cannot be referred for mediation under any circumstances.

THE TYPES OF DISPUTES SUITABLE FOR MEDIATION

It is evident that, mediation belongs to the disputing parties called disputants. The disputing
parties control the process, scheduling, costs, and outcome of the dispute. Mediation is less
adversarial. The process of mediation is informal. It is less confrontational than arbitration or
litigation. The process of mediation preserves options in a way where parties can enter into
mediation without jeopardising their option to arbitrate or litigate. Mediation makes way for
swift settlement. Most of the mediations are successfully concluded in a single day. Since
mediation can be scheduled soon after a dispute arises, parties reach settlement much earlier
than in arbitration or litigation. In many cases, mediations conclude before a formal
arbitration claim is filed. It is of lower cost when compared to the other dispute Resolution
methods. Mediation usually entails lower legal and preparatory costs, there is minimal
interruption of business or personal life, lost productivity is kept to a minimum, and the fees
and expenses of mediation are modest. Mediation paves way for preservation of business
relationships.
As a result of reaching an early resolution with minimal financial or other strain on either party,
the chances for preserving business relationships are greatly enhanced. Sometimes parts of a
dispute are resolved in mediation, leaving fewer or less extreme differences to be resolved in
arbitration or litigation. Gaining agreement on collateral issues can translate into significant
savings of time and money for everyone involved. This method protects privacy of the facts
revealed during the mediation proceeding by the disputed parties. Mediation offers greater
confidentiality than arbitration. This means that any party may not use what is revealed in the
discussion in any future proceedings without the consent of those affected, and that the
discussion is confidential. The confidentiality of any resulting agreement is for the parties to
decide together. The view, suggestions, admissions, proposals made during the mediation or
conciliation proceedings cannot be used in any legal proceedings. It is to be noted that a
document that is otherwise admissible and can be summoned does not cease to be so because
it is introduced in mediation proceedings.
 Thus, the above study shows that, mediators help the parties craft creative solutions. Settlement
50

potential is high in this process. The case proceeds promptly. The cost is modest and there are
benefits even if a settlement is not reached. The disposal of cases through mediation has a direct
advantage of not only reducing the number of pending cases in the Courts but also a collateral
advantage of reducing the number of appeals and revisions made to the superior Courts. In
other words, the advantage of a settlement through judicial mediation benefits not only the
Trial Court but also the Appellate Court, which has then to deal with a lesser number of cases.
The expected outcomes will not only directly benefit the Trial Courts but also collaterally
benefit the Appellate Courts. Another collateral advantage is that one case being settled settles
a large number of connected cases. Once parties reach an agreement and sign it, it becomes
enforceable under the provisions of the Arbitration and Conciliation Act, 1996 and the Code
of Civil Procedure. The Court will enforce the agreement by legal process of execution.
Advantages that are unique to the process of mediation is that, in this process, creative solutions
are possible, including options that are not available to Courts or tribunals. Mediation can
especially be helpful in the, resolution of family disputes, which includes the matrimonial
disputes, maintenance disputes, partition cases, and such other matters that are possible to be
resolve among the parties themselves without publicity. The process of mediation can also be
advantageous where financial compensation may not be all that is sought. It is possible to
rebuild trust and improve damaged working relationships. Misunderstandings can be cleared
up during the process of
mediation. 'Unfinished business' can be 'finished'. There is flexibility in the way the problem
solving is approached, without a requirement to go through fixed stages as in the case of
litigations in Court.

CONCILIATION

The Arbitration and Conciliation Act, 1996 Part III comprises of 21 sections dealing with
various aspects of the process of Conciliation. No such provision existed in the Arbitration Act
1940. The Statement of Objects and Reasons of Arbitration and Conciliation Bill, 1995 was,
“Like arbitration, conciliation is also getting increasing worldwide recognition as an instrument
for settlement of disputes. There is, however, no general law on the subject in India…Though
the said UNCITRAL Model Law and Rules are intended to deal with international commercial
 arbitration and conciliation, they could, with appropriate modifications, serve as a mode for
51

legislation on domestic arbitration and conciliation”.

The Part III of the Arbitration and Conciliation Act, 1996 adopts, with minor contextual
variation, the UNCITRAL Conciliation Rules 1980. One of the important innovations is the
intent to avoid formal proceedings and provides that the Code of Civil Procedure 1908 or the
Indian Evidence Act 1872 do not bind the conciliator85. The provisions under Part III of
Arbitration and Conciliation Act, 1996 confer same status and effect on the ‘settlement
agreement as if it is as award on agreed terms on the substance of the disputes rendered by an
arbitral tribunal under Section 3086. There are three main exceptions to the application of this
part87. Firstly, in the cases where any law for the time being in force provides otherwise.
Secondly in the cases where the parties agree not to be governed by the provisions of Part III
and agree to the effect that not to settle their disputes by conciliation. Thirdly, where any law
for the time being in force in India prohibits certain disputes to be submitted to conciliation.
Subject to these three statutory exceptions, disputes arising out of contractual or tortious
relationship may be resolved by conciliation in accordance with the procedure prescribed under
Part III of the Arbitration and Conciliation Act, 1996.

CONCILIATOR

A Conciliator is basically different from that of a Judge or an Arbitrator. The role of the
Conciliator is to assist the parties to reach their own negotiated settlement and he may make
suggestions as appropriate. Conciliator does not impose a decision on the parties but, on the
contrary, his role is to assist the parties to resolve the dispute themselves. He may give opinion
on issues in dispute but his primary function is to assist in achieving a negotiated solution88.
A conciliator can suggest terms upon which a settlement can be arrived at, but cannot impose
a settlement conceived by him on the parties. His role is merely advisory and not creative or

85
The Arbitration and Conciliation Act,1996. Section66
86
The Arbitration and Conciliation Act,1996. Section 74.
87
Black's Law Dictionary, 6th edn. (1990), West Publishing Co., p. 289.
88
Carrol and Dixon, ‘Alternative Dispute Resolution Developments in London’, ICLR Pt 4,1990, pp 436-37.
 decisive, like the role of an arbitrator or an adjudicator89. In practice, conciliation covers
52

different fields of activity, each with its own traditions, ethos and culture. The skill and
technique adopted by the conciliator in enabling the parties to come to a voluntary settlement
of dispute between them and thereby avoiding adjudication and in due course bringing about a
negotiated settlement vary. A conciliator, dealing with a commercial dispute, may have to
adopt altogether different procedure, technique and approaches, from that of a conciliator
dealing with family disputes or labour disputes. Nevertheless, all the fundamental principles
and procedure prescribed under the Arbitration and Conciliation Act, 1996 is the same.
A conciliator is as an independent and impartial person and he must enjoy confidence of both
the parties. The parties should be able to repose trust and confidence on him so as to enable
them to share their secrets and their thinking process with the conciliator with the belief that
the same should not be divulged to other party without specific instructions in that regard.
Therefore, a conciliator is bound by rules of confidentiality and not by the strict rules of the
Code of Civil Procedure, 1908 and the Indian Evidence Act, 187290. Though Section 66 is not
governed by the provisions of Section 18, the provisions of Section 67, requires the conciliation
to be aided by the principles of objectivity, fairness and justice are applicable to it. This ensures
that the conciliator will conduct the proceedings in a fair and judicious manner, in order to do
justice to each one of the parties. The number of conciliators generally appointed for a
conciliation proceeding is one unless the parties agree and give mutual consent to have more
conciliators than one91.

ROLE OF CONCILIATOR

The role of the ‘Conciliator’ is pro-active and interventionist. The conciliator records the
evidence of the parties and hears their arguments on the question of fact and law, the conciliator
forms his opinion and stops just short of making a decision because that does not fall in his
territory. Conciliator then proceeds to persuade the parties to come to a settlement in the light
of his opinion. Conciliator can suggest certain terms for the acceptance of the parties on which
the dispute can be resolved. Conciliator has to use his best endeavour to conclude the

89
OP Malhotra, Arbitration of Labour Disputes: Labour Adjudication in India, 2001, JILI pp31-32.
90
The Arbitration and Conciliation Act, 1996. Section66.
91
The Arbitration and Conciliation Act, 1996. Section 63.
 conciliation. Section 67, of the Arbitration and Conciliation Act, 1996 requires the conciliator
53

to play the following part in the process of conciliation: First, the conciliator shall assist the
parties in an independent and impartial manner in their attempt to reach an amicable settlement
of their dispute92. Secondly, the conciliator shall be guided by principles of objectivity, fairness
and justice, giving consideration to, among other things, the rights and obligations of the
parties, the usages of the trade concerned and the circumstances surrounding the dispute,
including any previous business practices between the parties93. Thirdly, Section67(3),
provides that, the conciliator may conduct the conciliation proceedings in such a manner as he
considers appropriate, taking into account the circumstances of the case, the wishes the parties
may express, including any request by a party that the conciliator hear oral statements, and the
need for a speedy settlement of the dispute. The conciliator may, at any stage of the conciliation
proceedings can make proposals for a settlement of the dispute. Such proposals need not be in
writing and need not be accompanied by a statement of the reasons therefore94.Thus, the
primary role of a conciliator is to act as a facilitator though he should not coerce the parties to
accept his opinion. The above provisions in the 1996 Act make it clear that the ‘Conciliator’
under the said Act, apart from assisting the parties to reach a settlement, is also permitted to
make “proposals for a settlement” and “formulate the terms of a possible settlement” or
“reformulate the terms”.

CONDUCT OF CONCILIATION PROCEEDING

A conciliation proceeding could be initiated in India when, one of the parties to the dispute
arising out of legal relationship invites the other parties to get the dispute resolved through
conciliation. The conciliation can start only if other party accepts in writing the invitation to
conciliate. If, however, the other party rejects the invitation for settlement through conciliation,
no such proceeding would be initiated. Even if no response were sent within thirty days to the
invitation, it would be deemed that the said request is rejected95.

92
The Arbitration and Conciliation Act,1996. Section 67(1)
93
The Arbitration and Conciliation Act,1996. Section 67(2)
94
The Arbitration and Conciliation Act,1996. Section67(4)
95
The Arbitration and Conciliation Act,1996. Section62(1) to (4)
 A statement of their respective cases is to be submitted by the parties to the conciliator in order
54

to enable the conciliator to understand the case of the parties and to form an opinion96. He can
call for additional statement of facts and information in order to enable him to give his
suggestion to the parties97.
The Conciliation proceeding could be classified into two types namely, facilitative conciliation
and evaluative conciliation. In facilitative conciliation, the conciliator avoids opinion and
judgments and he merely assist the parties to clarify their communications, interest and
priorities. On the other hand, in evaluative conciliation, the conciliator expresses his opinion
on the merit of the issues so as to enable the parties to approach settlement. His opinion is a
third-party view on the merit but such opinion would not be conclusive and binding98.
The section 69 of Arbitration and Conciliation Act, 1996 contains the provision regarding
communication between conciliator and parties whether orally or in writing and about place of
meeting. The conciliator may meet or communicate with the parties together or with each of
them separately. Unless the parties have agreed upon the place where meetings with the
conciliator are to be held, such place shall be determined by the conciliator, after consultation
with the parties, having regard to the circumstances of the conciliation proceedings. When the
conciliator receives factual information concerning the dispute from a party, he shall disclose
the substance of that information to the other party in order that the other party may have the
opportunity to present any explanation, which he considers appropriate. In the proviso to the
section 70, it is stated that when a party gives any information to the conciliator subject to a
specific condition that it be kept confidential, the conciliator shall not disclose that information
to the other party99. The Supreme Court of India in Haresh Dayaram Thakur Vs State of
Maharashtra 100case reinstated that under the provisions of section 72 each party may, on his
own initiative or at the invitation of the conciliator, submit to the conciliator suggestions for
the settlement of the dispute.
The success of a conciliation proceeding depends upon the genuine and honest desire of the
parties to settle the dispute amongst themselves with the assistance of the conciliator. The
parties shall in good faith cooperate with the conciliator and, in particular, shall endeavour to

96
The Arbitration and Conciliation Act,1996. Section65(2)
97
The Arbitration and Conciliation Act,1996. Section65(3)
98
Mackie, Miles, Marsh and Allen, ‘The Alternative Dispute Resolution methods Practice Guide;
Commercial Dispute Resolution’, 2nd edn, 2000, p 12, para1.3.3.
99
The Arbitration and Conciliation Act,1996. Section 70
100
2000(6) SCC 179.
 comply with requests by the conciliator to submit written materials, provide evidence and
55

attend meetings101. Thus, good faith of the parties in cooperation with the conciliator in the
conciliation proceeding, is a sine qua non for arriving at an amicable settlement of the dispute
and in the absence of good faith and bona fide co-operation by the parties, no conciliator can
succeed in bringing about an amicable settlement.
The parties are entitled to suggest terms of settlement, which would be discussed by the parties
wherein suggestions could be given by the conciliator on such terms for their observations but
the conciliator, cannot impose a settlement as conceived by him on the parties102. Under Section
73 of Arbitration and Conciliation Act, 1996 it is provided that, after considering the
reformulated terms of possible settlement, if the parties reach a settlement of the dispute, they
may draw up and sine a written agreement. Otherwise, the parties may request the conciliator
to draw up or to assist them in drawing up the settlement agreed upon by them. The parties
shall sign the settlement agreed upon by them. Such settlement shall be final and binding on
the parties and persons claiming under them respectively. The conciliator is then required to
authenticate the settlement agreement and furnish a copy of it to each one of the parties.
The Supreme Court of India in Haresh Dayaram Thakur VS. State of Maharashtra103 case held
that, a successful proceeding comes to an end only when the settlement agreement signed by
the parties comes into existence. It is such an agreement, which has the status and effect of
legal sanctity of an arbitral award under Section 74 of Arbitration and Conciliation Act, 1996.
In Mysore Cements Ltd Vs Svedal Barmac Ltd104 the Supreme Court noted that from the
Memorandum of Conciliation Proceedings and Letter of Comfort, it did appear that parties had
agreed to certain terms, but they could not straightaway be enforced by taking up the execution
proceedings. It falls short the essential legal pre-requisites to be satisfied for being assigned the
status of a legally enforceable agreement of settlement between the parties. In case the parties
arrive at a settlement during the discussion and the proceeding, a settlement agreement is drawn
up which would have the same effect and status as an arbitral award on agreed terms as
envisaged under section 30 of the Act105. The same thereafter could be enforced as a decree of
the Court under the Code of Civil Procedure 1908.

101
The Arbitration and Conciliation Act,1996. Section 71.
102
The Arbitration and Conciliation Act,1996. Section72
103
AIR 2000 SC 2281
104
2003 (10) SCC 375.
105
The Arbitration and Conciliation Act,1996. Section 74.
 A party desiring to avail the remedy could take resort to the said procedure during pre-litigation
56

and even during the pendency of litigation. If the effort does not succeed, the parties can always
come back to litigation.106However, during the pendency of conciliation preceding a party is
not entitled to pursue any arbitral or judicial proceedings in respect of a dispute that is the
subject matter of the conciliation proceedings. This is subject to one exception that, a party
may initiate arbitral or judicial proceedings where, in his opinion, such proceedings are
necessary for the preserving his rights107.

NEGOTIATION

It is true that, nothing is more satisfying and more soothing than a cordially negotiated
amicable settlement because, it protects and preserves personal and business secrets,
relationships and reputations that might otherwise be impaired by the adversarial process. The
process of negotiation does not fall either in the concept of ‘arbitration’ or ‘conciliation’.
Strictly, negotiation by itself, is not an alternative dispute resolution procedure because it is a
bipartite process and does not require a third party to facilitate and promote the settlement,
whereas alternative dispute resolution methods essentially involves a third person for
facilitating the resolution of the dispute by settlement. However, it is the most fundamental
way of dispute resolution and is generally treated as one of the main components of
alternative dispute resolution processes. It is only when the process of negotiation does not
succeed, that it transforms into alternative dispute resolution method by intercession of a
neutral and more structured process framework108.

A legal adjudication may be flawless but heartless but a negotiated settlement will be
satisfying, even if it departs from strict law’109. The parties should be encouraged, so far as
possible, to settle their disputes without reference to litigation110. The Arbitration and
Conciliation Act ,1996 gives legislative recognition to this concept under Section 30. Section

106
Conciliation and Mediation by Justice Dr.M.K. Sharma. Judge, High Court of Delhi, p1-4
107
The Arbitration and Conciliation Act, 1996. Section 77
108
Brown and Marriott, ADR Principles and Practice, 2nd edn,1999, p12, para 2-003.
109
Agarwal Engineering Co Vs. Technoimpex Hungarian Machine Industries, Foreign Trade Co.1977 (4) SCC
367
110
Cutts Vs. Head 1984 Ch 290.
 30 provides that, ‘I t is not incompatible with an arbitration agreement for an arbitral
57

tribunal to encourage settlement of the dispute and, with the agreement of the parties; the
arbitral tribunal may use mediation, conciliation or other procedures at any time during the
arbitral proceedings to encourage settlement’. In India, the process of negotiation as a
preferred dispute resolution method is yet to make an impact. Nevertheless, in many countries
it has made a remarkable impact.111

PROCEDURE

Negotiation is a non-binding procedure in which discussions between the parties are

initiated without the intervention of any third party with the object of arriving at a negotiated
settlement of the dispute. It is not confined to the core points of the dispute alone. In
order to facilitating overall settlement of the dispute, parties can introduce other issues as
trade-offs.
Negotiation is an interaction of influences. Such interactions, for example, include the process
of resolving disputes, agreeing upon courses of action, bargaining for individual or collective
advantage and of crafting outcomes to satisfy various interests.
The process of negotiation gives the parties an option to go over a wide range of issues. In
business disputes, the disputed parties try to reach a settlement by adopting a give and
take process, understanding each other’s point of view, as they best know the strength and
weakness of their respective cases and the parties have their market reputation at stake.
This gives a greater chance of reaching an amicable settlement by negotiations.

Negotiation involves three basic elements: process, behavior and substance.

The ‘process’ refers to how the parties negotiate, the context of the negotiations, the parties
to the negotiations, the tactics used by the parties, and the sequence and stages in which all
of these plays out. ‘Behavior’ to the relationships among these parties, the communication
between them and the styles they adopt. The ‘substance’ refers to what the parties negotiate
over: the agenda, the issues in their respective positions and more helpfully in interests of

111
OP. Malhotra, The Law of Industrial Disputes Vol I, 6th edn,2004, p 16.
 the parties, the options, and the agreements reached at the end by them112.
58

Skilled negotiators may use a variety of tactics ranging from a straightforward presentation
of demands or setting of preconditions to more deceptive approaches such as intimidation
and salami tactics may also play a part in arriving at the outcome of negotiations. The key
to Negotiation is information.

Emotions have the potential to play either a positive or a negative role in negotiation. During
negotiations, the decision as to whether or not settle rests in part on emotional factors.
Negative emotions can cause intense and even irrational behavior, and can cause conflicts
to escalate and negotiations to break down, while positive emotions facilitate reaching an
agreement and help to maximize joint gains.

Negative affect has detrimental effects on various stages in the negotiation process.
Although various negative emotions affect negotiation outcomes. Angry negotiators plan
to use more competitive strategies and to cooperate less, even before the negotiation starts.
These competitive strategies are related to reduced joint outcomes. During negotiations, anger
disrupts the process by reducing the level of trust, clouding parties' judgment, narrowing
parties' focus of attention and changing their central goal from reaching agreement to
retaliating against the other side. Angry negotiators can pay less attention to opponent’s
interests and can be less accurate in judging their interests, thus achieve lower joint gains.
Moreover, because anger makes negotiators more self- centered in their preferences, it
increases the likelihood that they will reject profitable offers. Anger does not help in
achieving negotiation goals either: it reduces joint gains and does not help to boost personal
gains, as angry negotiators do not succeed in claiming more for themselves. Moreover,
negative emotions lead to acceptance of settlements that are not in the positive utility function
but rather have a negative utility.

However, expression of negative emotions during negotiation can sometimes be beneficial:

legitimately expressed anger can be an effective way to show one's commitment, sincerity, and
needs.

112
http//en.wikipedia.org/Negotiation
59
ADVANTAGES

A negotiated settlement is conducive in preserving relations between the parties as also

their market reputation, which justifies the preference of the process of negotiation over
other alternative dispute resolution methods. The process of negotiation and the negotiated
settlement is possible at any time, even after the other methods of dispute resolution have been
initiated113.

The negotiated settlement is based on bipartite agreements, and as such, is superior to any
procedure involving third party intervention in matters that essentially concern the parties.

As against ‘arbitration’ and ‘conciliation’, the process of negotiation is most flexible and
informal, and provides ample scope for the parties to direct the proceedings suited to the facts
and circumstances of the case. For instance, parties are free to choose the location, timing,
agenda, subject matter and the participants. It is quick, inexpensive, private and less
cumbersome in comparison to other dispute resolution methods. It is a voluntary and non-
binding process, wherein the parties control the result and the procedure for coming to an
amicable agreement. The main advantage of negotiation can be said to be that, a settlement by
way of negotiation is always possible, even after other method of resolving the dispute have
been set in motion or having been set in motion, have not resulted in an amicable settlement
of the disputes114.

DISADVANTAGES

It is a common practice for the parties to an international contract to stipulate that before
embarking upon arbitration, the parties will endeavor to settle any dispute by negotiation
or some other form of alternative dispute resolution method.
The essence of negotiation that it is basically a business deal involving reluctant exchange of
commitments where both parties want to yield less and get more. It is akin to the

113
The Arbitration and Conciliation Act, 1996 Section33 and Section 73

114
Redfern and Hunter, Law and Practice of International Commercial Arbitration, 4th edn 2004, p35, para 1-69.
 practice of diplomacy.
60

The evolution and adoption of the modern systems of Information, communication

technologies and the concept of Cyber era has made the business and trade negotiations a
highly sophisticated science, involving a complex interchange of ideas combining arguments,
horse-trading and bluff. The businesspersons and traders use negotiation as a device for
trying to persuade the other to give him what he needs or wants and gives up something in
return.

The process of negotiation can sometimes become highly complicated, particularly because
the process of negotiation has emphasized a greater and extensive possibilities for joint gains
and interest base outcome. The final outc ome of negotiation would depend upon the art,
skill and dexterity of displaying strength by one party to the other. Where the other
determinants of strength are reasonably balanced, conviction can easily be the decisive factor.
The process of negotiation can start with easy bargaining slowly adopting a pleading
manner or in some cases the parties may hector, cajole or threaten the other party. The
powerful party to the dispute has an option to use the tactic of avoiding the process of
negotiation or withdrawing from the situation, which involve confronting others in resolving
differences. There by the party may use the threat of withdrawal as a strategy in his favor and
disadvantageous to that of the opposite party115. Negotiations can culminate into an
amicable settlement only if the parties have a genuine eagerness and will, followed by earnest
honest efforts and cooperation, to settle the dispute. However, it is unlikely to succeed
unless those involved are capable of a certain degree of detachment and objectivity. In long
term agreements it is common to find a formula that the, in the event of a dispute arising, the
parties will first endeavor to settle their differences by negotiations ‘in good faith’. Lord
Ackner in Walford Vs Miles116 has said that ‘an agreement to negotiate, like an agreement to
agree, is unenforceable… because it lacks the necessary certainty. A duty to negotiate in good
faith is as unworkable in practice as it is inherently inconsistent with the position of the
negotiating parties.

115
Brown and Marriott, Alternative Dispute Resolution methods Principles and Practice, 2nd 1999, p103

, para 6-03
116
1992 (2) AC ,1996. 128,138.
 Broadly speaking, negotiation is an interaction of influences. Such interactions, for example,
61

include the process of resolving disputes, agreeing upon courses of action, bargaining for
individual or collective advantage, or constructing outcomes to satisfy various interests.
Negotiation can thus be considered as another form of alternative dispute resolution
mechanism along with that of arbitration, conciliation and mediation mechanisms.

LOK ADALAT

The emergence of ADR has become a “global necessity” as judicial backlog proliferates.117Fast
and equitable dispute resolution is the need of the nations around the World and thus has led to
the adoption of various manifestations of alternative dispute resolution, including India. Lok
Adalat as the name suggest means people’s Court. The vernacular meaning of the word Lok
means people and Adalat means Court. Though the term Court is used it Lok Adalat has hardly
anything in common with the Law Court except that both are tools in the legal to deliver justice.
Lok Adalat goes to the people to deliver justice at their doorsteps. Thus, is a forum provided
by the interested people such as social activists, legal aiders and public-spirited people
belonging to every walk of life. In order to ensure that the settlement is fair according to law,
the forum may consist of legally trained people118. Their function is to enable the disputed
parties who voluntarily seek the Adalat’s intervention to understand their respective rights and
obligation with reference to the disputes brought before it and to help them in keeping the
dialogue going in fair manner. The role of the presiding officers of the Lok Adalat is to clarify
the law before the disputed parties and bring about settlement of the disputes between the
parties through conciliation and persuasive efforts119.

THE EVOLUTION OF LOK ADALATS

117
Jitendra N. Bhatt, ‘A round table Justice through Lok-Adalat’, 1 SCC (JOUR) 11 (2002).
118
M.G. Chitkara, LokAdalat and the poor,1993, p35
119
N.R. Madhava Manon, ‘LokAdalat: people’s program for speedy justice’, IBR,1986
Vol 13(2) p129.
 The study of the evolutionary history of the Dispute resolution methods elucidate that Lok
62

Adalat originated from the discontent of the Indian legal system to provide fast, effective, and
affordable justice. The Courts have become a competitive field for proving one’s social status
as against the other. The counsel, judge, and litigants often cite deference of honour,
harassment, and speculation as reasons for filing the cases in Courts and that makes cases drag
out for, in some cases, decades. In many instances, petitioners seek endless series of appeals,
revisions, and reviews. However, excessive party control places those seeking legal redress of
their claims in an unequal position since respondents can abuse and delay resolution procedures
with impunity. Commonly made interlocutory appeals shatter cases into many parts, each
making its own path through the judiciary. The ignorance of the presence of alternatives to
litigation makes a full, discontinuous trial necessary, regardless of how long a full trial may
take. Once a judgment is reached, the truly hard work of enforcement and execution begins.
When these factors are mixed with inefficient Court administration systems, judicial passivity,
and severely limited substitutes to a protracted and discontinuous litigation, widespread distress
and distrust of the Indian justice system is the inevitable result. The Supreme Court of India
has repeatedly interpreted that a “speedy trial is of essence to criminal justice and there can be
no doubt that the delay in trial by itself constitutes denial of justice.”120
The first modern Lok Adalat was held in Junagadh in 1981, though some argue that they
originated in Gujarat from the late Chief Justice of the Gujarat High Court, M P Thakkar.
Others contend that they began in Maharashtra well before 1982. 121Justice Thakkar had a
significant influence in directing the contemporary evolution of Lok Adalat. The guiding
principle of Justice Thakkar was, when he considered creating a system of Lok Adalat’s to
form a system that was “less expensive, less speculative, less glamorized, more participatory,
and more resolution oriented that would work to serve the purpose of justice with humanity in
mind.”122
The 1987 Legal Services Authorities Act provided free and competent legal service 123 to the
“weaker” sections of the society to ensure that opportunities for securing justice are not denied
to any citizen due to economic or other disabilities and to organize Lok Adalat to see that

120
Hussainara Khatoon Vs State of Bihar AIR 1979 SC 1364
121
Report on National Juridicare (“the Bhagwati Report”) Minister of Law, Justice and Government
Affairs, 1977
122
Girish Patel, Crippling Lok Adalat’s, INDIA TOGETHER,
123
Article 39A, Constitution of India.
 operation of the legal system promotes justice based on equal opportunity. This statute also
63

gave statutory authority to Lok Adalat, based on the practice of panchayat.124Under this system,
Lok Adalat is available at both the pre-litigation and litigation stages of dispute resolution.
In traditional Lok Adalat, one or both parties give their consent for the matter to be heard by
conciliators in a Lok Adalat. The conciliators are comprised of a sitting or retired judicial
officer and other “persons of repute” who may be prescribed by the state government in
consultation with the chief justice of the High Court. Where no compromise is arrived at
through conciliation, the matter is returned to the concerned Court for disposal according to
the law. This system gave the choice of forum for the resolution of their disputes along with
the Courts so that they may better make well-informed, rational decisions.
Lok Adalat’s have been successful in the settlement of various types of claims, including:
motor accident claims, matrimonial and family disputes, labour disputes, disputes relating to
public services, bank recovery cases, and other cases. Up to 2004, more than 200,000 Lok
Adalat’s had been held throughout India leading to the settlement of more than 16 million
cases, half of them involving motor accident claims. Partition suits, damages, and matrimonial
cases can be easily settled before Lok Adalat as the scope for compromise through an approach
of give and take is high in these cases. The Media across India, including the press for example,
The Hindu, have applauded the widespread adoption of Lok Adalat’s as a way to expedite
justice.125While preferring Alternative Dispute Resolution methods the effectiveness is seen as
the main target, rather than as a way to better justice.

THE ADVENT OF PERMANENT LOK ADALATS

The introduction of Lok Adalat’s as a dispute Resolution mechanism added a new chapter to
the justice dispensation system of India and succeeded in providing a supplementary forum to
the litigants for conciliatory settlement of their disputes. The Legal Services Authorities Act
1987 was enacted to give a statutory base to legal aid programs throughout the country on a

124
Upendra Baxi, The Crisis of Indian Legal System (1982) 52, 94(1976).
125
Nod to 20 fast track Courts, 4 Lok Adalat’s, The Tribunal, March. 13, 2005
 uniform pattern. This Act was finally enforced on 9th of November, 1995 after certain
64

amendments were introduced therein by the Amendment Act of 1994.

Article 39A of the Constitution of India provides for equal justice and free legal aid. It is,
therefore clear that the State has been ordained to secure a legal system, which promotes justice
on the basis of equal opportunity. The language of Article-39A is understood in mandatory
terms. This is made more than clear by the use of the twice-occurring word "shall" in Art-39
A. It is emphasized that the legal system should be able to deliver justice expeditiously on the
basis of equal opportunity and provide free legal aid to secure that opportunities for securing
justice are not denied to any citizens by reasons of economic or other disabilities.
The Legal Services Authorities Act, 1987 was enacted to constitute legal services authorities
for providing free and competent legal services to the weaker sections of the society to ensure
that opportunities for securing justice were not denied to any citizen by reason of economic or
other disabilities, and to organize Lok Adalat’s to ensure that the operation of the legal system
promoted justice on a basis of equal opportunity. The system of Lok Adalat, which is an
innovative mechanism for alternate dispute resolution, has proved effective for resolving
disputes in a spirit of conciliation outside the Courts.
A traditional view was that the Lok-Adalat only deals with the petty legal matter like accident
claim cases or insurance claim cases etc., and in a way, it is good for poor litigants who wish
to have quick justice system in place for insignificant legal matters. Nevertheless, this common
sentiment is no longer the case with respect to permanent lok Adalat’s, which are
distinguishable from lok Adalat’s in all but, name.
Certain salient features of the Legal Services Authority Act are enumerated under the following
sections. Section 2 (d) gives the definition of the term 'Lok Adalat'. Lok Adalat means a Lok
Adalat organised under Chapter VI of the Act. Section 19 provides that, the Central, State,
District and Taluk Legal Services Authority are created who are responsible for organizing Lok
Adalat’s at such intervals and place. Conciliators for Lok Adalat comprise of a sitting or retired
judicial officer, other persons of repute as may be prescribed by the State Government in
consultation with the Chief Justice of High Court. Section 20 provides for the reference of
cases. The Cases can be referred for consideration of Lok Adalat by consent of both the parties
to the disputes. One of the parties makes an application for reference. Where the Court is
satisfied that the matter is an appropriate one to be taken cognizance of by the Lok Adalat it
shall make such reference. Compromise settlement shall be guided by the principles of justice,
equity, fair play and other legal principles. Where no compromise has been arrived at through
conciliation, the matter shall be returned to the concerned Court for disposal in accordance with
 Law. Section 21 provides that once an agreement is arrived by the consent of the parties, the
65

conciliators pass award. The matter need not be referred to the concerned Court for consent
decree. Every award of Lok Adalat shall be deemed as decree of Civil Court. Every award
made by the Lok Adalat shall be final and binding on all the parties to the dispute. Moreover,
no appeal shall lie from the award of the Lok Adalat. Section 22 provides that every
proceedings of the Lok Adalat shall be deemed to be judicial proceedings for the purpose of
Summoning of Witnesses, discovery of documents, reception of evidences and requisitioning
of public record.
In 2002, the Indian Parliament amended the 1987 Legal Services Authorities Act (“LSSA”).
126
Chapter VI-A was introduced with the caption “Pre-litigation Conciliation and Settlement,”
which included Section 22-B envisaging the establishment of permanent lok Adalat’s “at
different places for considering the cases in respect of Public Utility Services (“PUS”).” Under
section 22C (1) any civil dispute with a public utility service, where the value of the property
in dispute does not exceed Rs1 million, or any criminal dispute that does not involve an offense
not compoundable under any law, can be taken up in the permanent lok Adalat.127 The
permanent lok Adalat’s is then expected to conciliate and bring about a settlement between the
parties as is its primary duty as per section 22-C(4).514 While conducting such conciliation
proceedings, it is incumbent on the members of permanent lok Adalat to assist the parties to
reach an amicable settlement. Once one party has made an application to permanent lok Adalat,
no party to that application shall invoke the jurisdiction of any Court in the same dispute.
Permanent lok Adalat’s attempt to settle disputes involving public utility services through
conciliation and, if not on the basis of merit. Panels are guided by the principles of natural
justice, objectivity, fair play, and equity without being bound by the Code of Civil Procedure
and the Indian Evidence Act. What makes permanent lok Adalat’s unique from traditional lok
Adalat’s is that, if the conciliation fails, “the permanent lok Adalat still has the jurisdiction to
arbitrate and decide the dispute”.128 Explicitly, if the permanent lok Adalat is of the opinion
that, there exist elements of settlement in such proceedings, which may be acceptable to the
parties, it shall formulate the terms of possible settlement, communicate its observations to the
parties and if the parties agree, the settlement shall be signed and an award shall be passed.
Award shall be in terms of such settlement and copies of the award shall be furnished to the

126
Legal Services Authorities (Amendment) Act, 2002. No.37 of 2002.
127
Section 22 C (1), Legal Services Authorities (Amendment) Act, 2002.
128
Legal Services Authorities (Amendment) Act, 2002 Section 22 C (8).
 parties.129 For all these purposes, permanent lok Adalat’s are vested with the same powers as
66

the Civil Courts under the 1908 Code of Civil Procedure, including: enforcing the attendance
and examination of witnesses, discovery or production of documents, reception of evidence on
affidavits, requisitioning of public records and documents, and such other matter as the
Government may prescribe.130 Permanent lok Adalat’s may even specify their own procedure
for deciding the dispute, which is still deemed to be a judicial proceeding.
The award of a permanent lok Adalat, whether made on merit or on settlement, is final and
binding on the parties and is be deemed to be a decree of a Civil Court. This fact was recently
litigated, and confirmed by the Indian Supreme Court in a series of cases.131It shall be executed
as if it is a decree of a Civil Court having jurisdiction in respect of the dispute involved. Yet
the award cannot be called into question in any “original suit, application or execution
proceedings.” In other words, no appeal is provided from the award of the permanent lok
Adalat.132Then again, permanent lok Adalat’s require execution of its award by District Civil
Courts with local jurisdiction. Hence, the quantum of a permanent lok Adalat award may be
reviewable by a three-person panel in the District Court, of which the District Judge is the
Chairman. This distinction with traditional lok Adalat’s means that an appeal is possible against
an award of a permanent lok Adalat in terms of Section 96(1) of the Code of Civil Procedure,
when the 1987 Legal Services Authorities Act does not specifically bar it and as the award has
all the attributes of a decree of a Civil Court. There is always a constitutional remedy available
under articles 226 and 227 of the Indian Constitution, which provides for the aggrieved party
to approach the concerned High Court by filing a writ petition. It would be pertinent to note
that the abovementioned amendment was challenged, but the Supreme Court upheld its
validity.133

129
Legal Services Authorities (Amendment) Act, 2002 Section 22-C (7)
130
Legal Services Authorities (Amendment) Act, 2002 Section 22 C (8).
131
Jagtar Singh and Another Vs. State of Punjab and Others, Criminal Appeal Nos. 1030–1031 of 2004; 2004
Indlaw SC 784. 2004.
132
Section 21 (2), Legal Services Authorities (Amendment) Act, 2002 Section 21 (2).
133
S. N. Pandey Vs. Union of India (Civil writ No. 543/2002)
 COMPARATIVE ANALYSIS WITH OTHER COUNTRIES
67

Charles Dickens in his book Bleak House narrates that, “In the High Court of Chancery, the
solicitors are mistily engaged in one of the ten thousand stages of an endless cause, tripping one
another up on slippery precedents, groping knee-deep in technicalities and making a pretense
of equity with serious faces… This is the Court of Chancery… which exhausts finance,
patience, courage, hope, so overthrows the brain and breaks the heart: that there is not an
honorable man among the practitioners who does not give – who does not often give – the
warning, ‘Suffer any wrong that can be done to you rather than come here’134. These events are
identifiable to that of the Courts in India, which are facing the problem of judicial delays and
arrears which emphasis the need for alternative dispute Resolution methods.
Abraham Lincoln, then President of the United States of America has once said that,
“Discourage litigation; persuade your neighbours to compromise whenever you can. Point out
to them how the nominal winner is often a real loser – in fees, expenses, and waste of time. As
a peacemaker, the lawyer has a superior opportunity of being a good man. There will still be
business enough.”
The world is converging as a result of ‘globalization’. Its legal effect is seen from the increasing
multilateral treaties, conventions and agreements within WTO, the EU, as a result of which
there is changes being introduced to domestic law for performance of both the international
and regional obligations. Understanding the profile of individual legal system of the different
Countries around the world is essential, but a “Regional” and a wide “Global” approach to the
dispute resolution and law is probably a futile exercise. The researcher has made a restricted
study on the ADR methods of different Countries. The study is about the uniqueness of the
ADR methods successfully functioning in the countries like United States of America (US),
United Kingdom (UK) Australia and China, Japan, which can possibly be made popular and
be adopted as per the Indian dispute resolution systems.

134
Charles Dickens, Bleak House, (1853), PC Rao, ADR,1997 p,103(M. Jagannadha Rao “Need for
more ADR centers and training for lawyers and personals”)
 UNITED STATES OF AMERICA (USA)
68
The development and use of alternative dispute Resolution mechanisms in USA pre-dates both
the declaration of Independence and the Constitution. Arbitral tribunals were established as
early as 1768 in New York and shortly thereafter in other cities primarily to settle disputes in
the clothing, printing and merchant seaman industries135. The United States law has strongly
recognised and favoured recognition of agreement to arbitrate and enforcement of arbitral
awards, both in domestic and international commerce. In 1854, the United States Supreme
Court held that arbitration as a mode of settling dispute should get every encouragement from
the Courts and the Court upheld the right of an arbitrator to issue binding judgments136. Writing
for the Court, Justice Grier said that the arbitrators are the judges chosen by the parties to decide
the matter submitted to them, finally and without appeal137.Arbitration law in United States
arises from both National laws i.e. the Federal Law and the law of various States. The National
Congress enacts federal statutory laws and they govern matters within federal jurisdiction.
The federal statutory law of arbitration contained in the Federal Arbitration Act, which was
first enacted in 1925, has been amended several times since then. It is confined to disputes in
Federal Courts. The 1970 amendment was made to implement the accession by the United
States to the United Nation Convention on the Recognition and Enforcement of Foreign
Arbitral Awards138. In addition, almost all the States comprising the United States have their
own arbitration statutes, enacted by their State legislatures. The State statutes are patterned on
the model law of Uniform Arbitration Act that was first adopted in1955 and amended in1956.
Most State statute, while differing in some detail, follow the general principles as those
embodied in Federal Arbitration Act.
The arbitration law began in United States in early rule of the English Government. There are
numerous references in the Statute Books of Arbitration of particular cases such as disputes
against Stockholders of Corporations, but the New York Chamber of Commerce had arbitration
facilities from 1761 to 1920 and New York Stock Exchange provided for arbitration of
member’s disputes in its Constitution of 1817. The question of constitutionality of arbitration

135
Dana H. Freyer, The American Experience in the field of ADR. p,108, P.C. Rao and Eilliam Sheffild, The
Arbitration and Conciliation Act,1996 (1997).
136
Burchell Vs Marsh, 58 U.S. 344.
137
Burchell Vs Marsh, 58 U.S. at 349
138
U.S. Code, Title 9, Chapter 1 and 2.
 was raised in Courts of law139. Compulsory arbitration unless accompanied by sufficient
69

provisions for an appeal to the ordinary Courts has been deemed unconstitutional140.
Despite observation of the Courts and interference by the Legislature, use of arbitration has
been in trend in United States for commercial matters largely due to the influence of Chamber
of Commerce and other Trade Associations. The New York State Chamber of Commerce has
printed its earliest arbitration records consisting of Minutes of its Committee from 1779 to
1792. Some States in the USA have passed Acts for compulsory arbitration so as to avoid delay
in the Court proceedings in respect of certain claims, such as motor accidents and small claims.
These statutes exclude the traditional jurisdiction of Courts based on equity. The Year book on
commercial arbitration in the United States for 1927 contained provisions for arbitration
including forms, rules and regulation and panel of arbitrators in Trade Association for thirty
principal branches of commerce, and a comprehensive list of Chamber of Commerce
Exchanges, Municipal Courts, Legal Aid Society and Bar Associations Furnishing arbitration
facilities in every part of the country.
In USA, mediation as a method of dispute resolution was used in an ad hoc way since long
time, though litigation was the primary method of dispute resolution. In 1976, Pound
Conference was held to commemorate the 70th Anniversary of Dean Rosco Pound’s
dissertation on the “Public dissatisfaction with American legal system”. The conference took a
close view as to the reasons as to why American Courts were criticized. One of the reasons
why justice administration in America was criticized was because of overcrowded and costly
Court system. The ADR movement of America started with Pounds Conference 1976.
Arbitration is used extensively in United States of America in commercial disputes, including
disputes over the performance of contracts, quality of goods and wide variety of other
controversies that are amenable to agreement between the disputed parties. Since the enactment
of the Civil Justice Reforms Act (CJRA) 1990, which calls for every federal district Court to
implement a civil justice expense and delay reduction plan, there has been tremendous growth
in the creation of ADR programs and the use of ADR by federal and State Courts. A growing
number of Courts have promulgated rules that mandate or authorize judges to recommend, or
require litigants to participate in, ADR procedures such as summary jury trials, early mediator
evaluation, mini-trials, mediation and arbitration. As of September 1995, 80 of 94 Federal

139
Exall Vs Bombay Mountain Beam, Colorado 1928,232 Specific Report 680
140
St. Lewis, I.H and S. Rly.Co. Vs William (1887) 49 Arm 492.
 District Courts had authorized or established some form of ADR program141. Alternative
70

dispute Resolution methods have been so successful in America that the District Court of
Colombia introduced a voluntary mediation program in 1989 and in the year 1997, it is said
that more than, 1,000 cases have completed mediation. Moreover, the program boasts a 50 %
settlement rate142.
In the Native American culture, peace-making is the primary method of problem solving.
Disputes are handled in a way, which deals with the underlying cause of conflict, and mends
relationships143. The institutionalization of ADR in America can be said to be with the
establishment of American Arbitration Association. The principal arbitration institution is the
American Arbitration Association (AAA), which was found in 1926 in response to the need
for an arbitration institution able to administer all kinds of cases in all parts of United States of
America144. It is an independent, non-governmental, non-profit organisation. It is governed by
a Board of Directors chosen from a wide range of industries, professions and social groups
throughout the nation. A full-time professional staff of experts in arbitration procedure and law
administers it.
The Court of Appeals for the District Court of Columbia also has implemented a mediation
program in an effort to supplement the Court’s 1986 Case Management plan, which was
undertaken to accommodate a 60% increase in filing and pending cases over the prior two years
period. The key difference between these two programs is that the Court’s Chief Staff Counsel
selects cases in the Appeals Court program for mediation, whereas the District Court program
is strictly voluntary. In 1994, the CPR Institute for Dispute Resolution conducted a survey of
244 of the largest law firms in United States, all of which had demonstrated interest in
alternative dispute Resolution methods through membership in the CPR Institute and found
that 65% of the 124 responding firms had formalized their delivery of ADR services with 68%
having adopted two or more of the following organizational strategies. The strategies like
designation of an ADR specialist or partner (58%), the organization of an ADR committee or
department (47%), strategic profiling of one or more prominent partners a neutral (27%) and
creation of a distinct provider group within the form, or affiliated with but distinct from the

141
Dana H. Freyer, The American Experience in the field of ADR. P, 110, in P.C. Rao and Eilliam Sheffild, The
Arbitration and Conciliation Act,1996 (1997)
142
Cumulative Mediation Statistics for U.S District Court for the District of Columbia (February 1996).
143
Kimberlee K. Kovach, Mediation Principles and Practice p.19, West Publishing Co. 1994.
144
P.C. Rao and Eilliam Sheffild, the Arbitration and Conciliation Act, 1996 (1997) at, Dana H. Freyer, The
American Experience in the field of ADR. P, 108.
 firm (14%)593. It has revealed that there are significant differences in perceived gains from
71

ADR between firms that had formalized their ADR organization and those that had not done
so. 59% of the organized firms verses 35% of unorganized firms reported positive client
comments from their alternative dispute Resolution methods initiatives and 49% of the
organized firms verses 21% of the unorganized firms reported that ADR has had an
appreciable, positive impact on the firm’s lawyers, clients and practice. New business or new
clients resulting from the firm’s ADR expertise were reported by 37% of the organized firm
and only 2% of the unorganized firms.
Moreover, the judges of the Supreme Court increasingly encourage litigants to use both public
and private alternative dispute Resolution methods to resolve their disputes. In addition to the
State programs discussed above, Special Courts offering relatively expeditious processing of
commercial disputes have been set up in three major cities namely New York, Chicago and
Wilmington. The Commercial Division of the New York State Supreme Court is exclusively
devoted to commercial disputes, committed to expedited process and encouragement of
settlement. Four judges hear cases in this Court from start to finish. This offers several
advantages, the most obvious of which is speed. Specialization also allows these judges to
develop subject-matter expertise. Prior to its implementation, each judge was assigned
approximately 1,000 pending cases. Because of the Court’s commitment in expediting
proceedings and encouraging settlement at every opportunity, within one year, the average
caseload reduced to 400 cases per judge. In U.S.A., judicial settlement conferences and
settlement weeks have resulted in a high success rate. In some of the Federal States of U.S.A.,
legislation has been passed to provide for private judging (also known as 'rent a Judge') such
as Texas, California, New York, Ohio and Oregon. Multi-Door Courthouse system which has
been developed in U.S.A., if followed, could offer the prospect of greater access to justice and
more economical and faster resolution of disputes.145
In USA, where ADR has been practiced in every Court at the State level since the 1970s, more
than 90% of all pending cases are settled through advocate and judicial mediation and hardly a
few percent of all cases actually proceed to trial. However, it took the American justice delivery
system over 20 years to achieve this success rate. Mediation was introduced in USA first
through judicial mediation and, once accepted, then advocate mediation. The broad pool of
qualified advocate-neutrals is essential to this success rate in USA. In the USA high volume

145
Freyer,” The integration of alternative dispute Resolution methods into Corporate Law Firm Practice,”45
Arbitration and Conciliation Act, 1996.J, 3,7-8.
 Court systems, advocate neutrals are relied upon to resolve the majority of cases and judicial
72

mediators are reserved for the most complex cases and cases that advocate neutrals have been
unable to resolve. The alternative dispute Resolution methods in United States of America is
multifaceted and diverse. The growth in the use and the development of different alternative
dispute Resolution methods has resulted from initiatives at all levels and from all branches of
the government- executive, legislatures, and judiciary and from many corners of the private
sectors, community organization, corporations and the bar. With these increased inclusions of
alternative dispute Resolution methods in domestic as well as international commercial
agreements and the wide publication of ADR success, the alternative dispute Resolution
methods are continuously expanding.

UNITED KINGDOM (UK)

Arbitration in England is as old as its legal history. At Common Law the parties could at any
time before award revoke the authority of the arbitrator even where the agreement expressly
made the submission irrevocable. The subject matter of disputes was mainly confined to
Chattel and Tort. With the expansion of the British Empire and the growth of trade, disputes
with merchants and traders increased and commercial matters were frequently referred to
arbitration. This resulted in substantial reduction of trial of commercial business in Courts.
English Courts felt greatly prejudice against arbitration. It was thought that arbitration was an
attempt to oust the jurisdiction of Court. The Statute of 1698146 was the first legislation towards
encouragement of arbitration. The Statute of 1833 followed it147. The Common Law Procedure
Act of 1854 and the England Arbitration Act of 1889 codified the general law relating to
arbitration. It sub-divided the subject-matter of arbitration into the one where references are by
consent of parties out of Court, and the other reference under the order of the Court. With
regard to the former, the Act required a submission to arbitration to be in writing. The
submission unless a contrary intention was expressed in it, was irrevocable except by leave of
the Court or a judge. An arbitrator was not liable for want of skill or for neglect in conducting
the arbitration. An arbitrator had power to administer oath. In the absence of any express
provision in the submission, an award was required to be made within three months from the

146
9 and 10 William III C 15.
147
3 and 4 William IV C 42.
 date of entering upon the reference. All the disputes referred to arbitration had to be disposed
73

of by the award. With regard to reference under order of Court, a Court or a Judge could refer
any question arising in any cause or matter to an official of Special Referee whose report could
be enforced like a judgment or order. The Act of 1889 was the foundation of subsequent
legislations relating to arbitration in England.
The England Arbitration Act of 1889 and the subsequent legislations relating to arbitration,
however, cannot be said to contain the whole law of arbitration in England. Many of the
statutory provisions could be excluded. The parties were free to agree to the procedure to be
followed by the arbitrator and the powers to be vested in him. The parties by agreement could
determine the constitution of the arbitral tribunal that was to decide the dispute. All the legal
defences available to the party before the Court were also available in arbitration.
The Arbitration Clauses (Protocol) Act, 1924 was passed to ratify and give effect to the
Protocol signed at the assembly of the League of Nations and in regulating the procedure to be
adopted in commercial arbitration between parties to the jurisdiction of the signatory States. In
1925 the Supreme Court of Judicature (Consolidation) Act repealed and replaced certain
section of Arbitration Act, 1889.The Arbitration (Foreign Awards) Act, 1930 gave effect to a
convention on the execution of the arbitral award and made amendments of the Protocol Act,
1924. The Arbitration Act of 1934 made substantial changes by supplementing the Act of 1889.
These two statutes were consolidated in the Arbitration Act of 1950. The Arbitration Act, 1950
came into force with effect from 1st September 1950. It provided for the procedure regulating
arbitration made as a result of a written agreement between the parties as well as certain
arbitrations conducted under statutory provisions. If the parties to a dispute agree, many
provisions of the 1950 Act need not be observed. The Departmental Advisory Committee
(DAC) reported that there were fundamental problems in the presentation of Arbitration Law
of England due to some uncertainty and confusion in English arbitration law. DAC advices that
there should be new improved legislation relating to arbitration. Thus, the idea of the
Arbitration Act 1996 was conceived. The Arbitration Act of 1950 has been repealed by the
Arbitration Act 1996 with the exception Pt II, which relates only to enforcement of a limited
number of Foreign Awards. The rest of the provisions with suitable modifications have been
re-enacted in the Act of 1996. This Act 1996 does not adopt the UNICTRAL Model Law in its
entirety, its structure and content are mainly based on it148. The Arbitration Act of 1996
received the Queen’s assent on 17 June 1996 and came into force from 31 January 1997. This

148
Dice and Morris, ‘The Conflict of Laws’, Vol 1,13th edn, 2000, p 594, para 16-006
 Act compounds the doctrine of arbitration law with realities of institutional practices, and
74

integrates the largest developments into regulatory provisions. The amalgamation of doctrine
and practice with comprehensiveness of the 1996 Act, qualifies it to be a prototype statutory
framework for governing an international arbitration
proceeding. The Act 1996 functions with the principle of speedy, inexpensive and fair trial by
an impartial tribunal, party autonomy and minimal Court intervention. In case of ambiguity as
to the meaning of any provision of the Arbitration Act 1996, regard is to be given to these
principles149. The English Common Law of Arbitration and the English Arbitration Act form
the main source of the law of the Arbitration in most of the Commonwealth Countries and the
United States of America.
With the Woolf Reforms, it seems likely that mediation will become a more prominent fixture
on the dispute resolution landscape in England and Wales. Civil Procedure Rule 1.4(2) (e) now
requires the Court, as part of its responsibility to actively manage cases, to encourage the parties
to use an ADR procedure if the Court considers it appropriate and to facilitate the use of such
procedure.
Although City of London lawyers and others have embalmed mediation as a technique to
resolve large commercial cases, the cost savings that can be achieved through effective and
early use of ADR are such that very few types of dispute cannot be assisted by ADR.
With the opportunity for creative solutions, for a fast and inexpensive resolution that the parties
develop and buy into, and for a process that enhances rather than destroys on-going business
relationships, alternative dispute resolution method is likely to grow rapidly in popularity over
the next few years in the UK. As lawyers become more sophisticated consumers of alternative
dispute resolution services, they and their clients will select mediators best suited for a given
dispute and the number and range of competent, qualified mediators will expand.

CHINA
The basic framework of civil litigation in China is set forth in the Civil Procedure Law of the
People’s Republic of China, adopted by the National People’s Congress on 9 April 1991150.
The general rule is that civil actions against citizens, legal person and organizations come under

149
Tweeddale and Tweeddale, Arbitration of Commercial Disputes, International and English Law and practice,
p494-495, 2005.
150
The Civil Procedure Law of the People’s Republic of China, 1991
 the jurisdiction of the Chinese Court in the place where the defendant is domiciled 151. Certain
75

actions, however, fall within the jurisdiction of the Chinese Court of the place where the
plaintiff is domiciled, including cases concerning personal relationships where the defendants
are not resident within PRC152.
The Chinese jurisprudence has two major philosophical traditions: Confucianism and Legalist
thought. Unlike Confucian thought (li) which seeks to make the enforcement of law flexible
and adaptable, the legalist tradition (fa) stresses that society can achieve harmony only where
transgressions are met with firm and swift punishment. Folsom and Minan, held that in China
mediation and conciliation remain the predominant forms of civil and commercial dispute
settlement in both domestic and international affairs153.This preference derives from the
Confucian philosophy’s exaltation of harmonious relationships154.The 1949 Revolution and
establishment of the PRC, while annulling many old systems and tradition, institutionalized
informal mediation systems. However, the Communist blessed and co-opted mediation not
only as a form of dispute, but also as a tool for the Communist Party to exert political, economic
and social pressure155. Mediation is so pervasive in China that it may be useful to distinguish
its context, namely whether it is prescribed by law, extra –judicial or judicially required156.
Mediation is the first choice for dispute settlement in China. China’s principle use of mediation
is a direct result of the Confucian view of natural harmony and dispute resolution by morals
rather than coercion. Chinese mediation boards or committees made up of several individuals
from each local community resolve more than 80 per cent of all civil disputes157. Mediation is
the corner stone of the Chinese system of dispute resolution. It has played a prominent role in
both traditional and contemporary China. It has also been employed to deal with dispute arising
from Chinese- Foreign business contracts. Mediation is used as an Independent method for

151
The Civil Procedure Law of the People’s Republic of China, Art.22.
152
The Civil Procedure Law of the People’s Republic of China, Art.23
153
Ralph H. Folsom and John H. Milan, Law in the People’s Republic of China. Commentary, Readings and
Materials 3-4 (1989)
154
Jun Ge, “Mediation, Arbitration and Litigation; Dispute resolution in the People’s Republic of China”,15
UCLA Pac Basin LJ 122 ,123 (1996)
155
Ralph H. Folsom and John H. Milan, Law in the People’s Republic of China. Commentary, Readings and
Materials at 86, 89-113 (1989)
156
Jun Ge, “Mediation, Arbitration and Litigation; Dispute resolution in the People’s Republic of China”,15
UCLA Pac Basin LJ 123-128 (1996)
157
L.L.N.2005 (5) Mar 465 (J 66)
 dispute settlement and in some places, it is employed in combination with litigations of
76

arbitration proceedings.
China has extended the use of mediation to its arbitration and litigation proceedings. The China
International Economic and Trade Arbitration Commission (CIETAC) and the China Maritime
Arbitration Commission (CMAC) permit an arbitral tribunal to mediate a case during
arbitration if both parties desire or one party so desires and the other does not object when
consulted by the tribunal. Although arbitration is frequently designated as a means of
international dispute settlement contracts with Chinese agencies or corporations may simply
refer to consultation and mediation between the parties as the means to resolve disputes158.
Under Chinese law, the settlement agreement is deemed to constitute a private contract. One
of the unique characteristics of arbitration in China is that proceedings before the international
arbitration bodies frequently involve conciliation. In general, at any time during the course of
the proceedings, with the consent of the parties, the arbitrators may resort to conciliation in an
effort to resolve the disputes. If their efforts are unsuccessful, the arbitrators are then permitted
to resume the arbitral proceedings and render an award.
The emphasis on mediation carries over not only to arbitration, but to litigation proceedings as
well. Under the Civil Procedural Law, Courts can attempt mediation during the proceedings
and may invite relevant parties and individuals to assist159. Any mediation agreement must be
reached voluntarily between the parties160.The general rule regarding the legal effect of a
mediated settlement is that Court mediated agreements are legally binding in the same way as
a Court judgment.
The legislation governing arbitration in China is the Arbitration Law of the People’s Republic
of China (the Arbitration Law)161.The Arbitration Law is a unified law applicable to both
foreign and domestic arbitration. It calls for the creation of the China Arbitration Association
to serve as a non- governmental, self-regulating organization of arbitration Commission162.The
establishment of foreign related arbitration commissions and the formulation of arbitration
commission rules fall under the responsibility of the China Council for the Promotion of
International Trade (CCPIT) 163. After introduction of the Arbitration Law there are almost 93

158
Michale Pryles, Dispute Resolution in Asia, p,85, (2002), Kluwer Law International
159
The Civil Procedure Law of the People’s Republic of China, Art. 85 and 87.
160
The Civil Procedure Law of the People’s Republic of China, Art. 88
161
The Arbitration Law of the People’s Republic of China, 1995.
162
The Arbitration Law of the People’s Republic of China, Art.15.
163
The Arbitration Law of the People’s Republic of China, Art.66 and 73.
 arbitral bodies established in China as per the report of the Chinese International Economic
77

and Trade Arbitration Commission (CIETAC). Under the amended Rules of Chinese
International Economic and Trade Arbitration Commission, CIETAC may accept cases
between foreign investment enterprises and other Chinese legal persons as well as other cases
that are not foreign- related.164
International arbitration in China is conducted predominantly before two institutions: CIETAC
and the China Maritime Arbitration Commission (CMAC). Both CIETAC and CMAC operate
under the umbrella of the China trade promotion body, the CCPIT, also known as the China
International Chamber of commerce. The general, CIETAC’s jurisdiction extends to all types
of commercial disputes whereas CMAC’s jurisdiction is limited to maritime disputes. The
cases heard by the Arbitration tribunal of three arbitrators are decided by majority vote. If a
majority opinion cannot be reached, the award will be based on the opinion of the presiding
arbitrator165. The Arbitration Law of the People’s Republic of China Art 55 and 56 insists that
arbitral award must be in written form, dated, identifying the place of issuance and be signed
by a majority of the arbitrators. The award must contain reasons unless the parties agree
otherwise or unless the ruling is made in accordance with a conciliation agreement166. Under
the CIETAC Rules, awards are final and binding on the parties.167

JAPAN
Japanese business practice emphasizes autonomy in disputes, privacy for disputing parties, and
case specific solutions. In west, parties turn to alternative dispute Resolution methods to avoid
crowded Courts dockets and high litigation costs. Confucian philosophy has long influenced
Japanese society. Confucianism’s moral philosophy emphasizes the ethical meaning of human
relationships. Harmonious relationships with others achieve the basic Confucian value of Jen,
which is often translated as compassion, human –heartedness or man-tomanness. The Japanese
express this spirit of harmony as the virtue of wa. If people abide by wa, disputes would not
arise. It is one’s duty to avoid discord. En is the principle of social tie. Maintaining the

164
The Rules of Chinese International Economic and Trade Arbitration Commission came into effect
from 1october 2000.
165
The Arbitration Law of the People’s Republic of China, Art.54.
166
The Arbitration Law of the People’s Republic of China, Art 55 and 56.
167
The Arbitration Law of the People’s Republic of China, Art.60.
 relationship bound together by these forces is the paramount concern168. Confucianism
78

emphasized filial piety and the notion that individual interests are subordinate to group welfare.
Thus, under this model, when individual disputes arose, compromise or the predisposition to
yield was morally superior to the predisposition to insist169. Reflecting these values, Japanese
dispute resolution procedures are characterized by conciliation, less litigation, and very few
lawyers170.
With the arrival of Admiral Perry in Japan the development of commercial relations between
Japanese and Westerners started. The westerners did not conduct these relationships under the
principle of social harmony. In response, Japan developed a Civil Code based on the German
model. The imposition of an American –style Constitution on Japanese during the post-World
War II occupation, opened the door for more American – Style revisions to the Japanese Civil
Code171. However, the Confucian principle of social harmony continues to define how groups
interact with each other.
Dispute resolution in Japan encourages and protects social rights, which includes one
individual owes to another. Yet there is no concept of individual rights in Japanese society.
Rather the emphasis has been on the duty to maintain harmonious relationships. Thus, the
Japanese, in their approach to dispute resolution, prefer extra-judicial, informal means rather
than litigation. Litigation is seldom utilised by the Japanese as a dispute resolution mechanism.
It does not necessarily follow that, the Japanese are truly non-litigious; in fact, litigation in
Japan is increasing. However, it means the dispute resolution mechanism of last resort. 172
Dispute resolution through extra-judicial means is closely akin to negotiation. Most Japanese
start from the premise that agreement can be reached. This premise derives from the desire to
preserve harmonious relationships. Robert March suggests that the Japanese negotiation style
is to patiently pursue the goal by defending their position173. Commentators note that the
Japanese consider a contract a document that sets forth a relationship and not a description of
the rights and obligation of each party174.Many arrangements are left vague and open-ended so

168
David J. Prazeracki, Working It Out: A Japanese Alternative to Fight it Out, 37 Clev St Rev, p 157(1989)
169
Andrew M. Pardieck. “Virtuous Ways and Beautiful Customs: Role of Alternative Dispute Resolution in
Japan”.11Temp Int’l Comp L J at 35(1997)
170
David Prazeracki, Working It Out: A Japanese Alternative to Fight it Out, 37 Clev St Rev,156- 157(1989)
171
David Prazeracki, Working It Out: A Japanese Alternative to Fight it Out, 37 Clev St Rev,158 (1989)
172
David Prazeracki, Working It Out: A Japanese Alternative to Fight it Out, 37 Clev St Rev,163-166 (1989)
173
Joseph W.S Davis, Dispute Resolution in Japan, p439-45 (1996)
174
David Prazeracki, Working It Out: A Japanese Alternative to Fight it Out, 37 Clev St Rev,161-162 (1989)
 that discussions, in the context of an ongoing relationship, can be held to adjust to changing
79

conditions. There is a strong expectation that dispute should not arise, and if they do, resolution
should be through mutual agreement. The Japanese will generally make a sincere effort to find
an amicable solution. Settlement negotiations through mutual concessions are called Jidan.
Both make suggestions on how to improve communications. The parties generally attempt to
find out why the failure occurred and how to rectify it. It is not considered a weakness in Japan
to keep talking. Over 95 percent of all disputes in Japan are resolved through negotiation and
compromise.175
In Japan, Judges intervene extensively during the in-Court settlement; every Japanese Judge is
expected, both by law and by litigants, to move a case towards settlement. This has the force
of statutory law. At least 40% of the cases are settled. The Judge, who decides to switch the
litigation to a settlement mode, takes off his robe and acts as mediator. The Japanese do not
favour arbitration as a method of dispute resolution. Because it is a third party’s adjudication
and it cannot fully restore the harmony disrupted by the dispute. However, in disputes involving
international business transactions, arbitration has gained widespread acceptance. Arbitration
allows Japanese concerns to negotiate equitable positions as opposed to purely legal
technicalities and to avoid extensive pre-trial discovery battles that serve only to exacerbate the
conflict.176
While Japanese have established arbitration institutions, including the Japanese Commercial
Arbitration Association (JCAA) and have adopted modern arbitration rules, Japanese
arbitration follows Japanese cultural aversion to an adversary process. For example, JCAA
recognizes the power of an arbitrator to make decisions regardless of law. The arbitrator is to
strive for a fair result. Arbitrators through mediation and conciliation frequently settle the
dispute submitted to arbitration. Many Western commentators describe Japanese arbitration as
an effort to persuade the parties to settle rather than to render an award177.
A brief look at the international scenario of alternative dispute resolution mechanism reveals
the popularity of alternative dispute resolution methods and its usage in these countries. These
unique experiences and techniques can help the disputed parties, the institutions and
Individuals in their adoption, use and choice of the relevant form of resolution of disputes

175
Joseph W.S Davis, Dispute Resolution in Japan, p151-152 (1996)
176
Andrew M. Pardieck, ‘Virtous Ways and Beautiful Customs: Role of Alternative Dispute Resolution in
Japan”.11Temp Int’l Comp L J at 45(1997)
177
Joseph W.S Davis, Dispute Resolution in Japan, p171-173 (1996)
 methods. This uniqueness can be adopted with due modification in India as per the existing
80

facts and circumstances of the Country. This will ultimately help the social, economic and legal
development of the Country and its people. The apt use of different alternative dispute
resolution method by the disputed parties, can give quick, economical and win-win result in
the dispute resolution process and thus, reinforcing the peace and harmony of the society and
reducing the problem of judicial delays and arrears before the Courts.

CONCLUSION

Abraham Lincoln has once said: “Discourage litigation. Persuade your neighbours to
compromise whenever you can point out to them how the nominal winner is often a real loser,
in fees, expenses, and waste of time”. India is moving towards the ray of light of judicial
equality. The ADR system acts as a supporting agent to climb up the ladder of justice for ALL.
India is in a desperate need for equality for all. ADR is a solution for ALL. On the basis of
above analysis, ADR is the best and most effective solution to reduce the pendency of cases in
various courts of our country. Let’s not forget that the ADR is more effective as it brings about
harmonious relationship between both the parties unlike in the conventional courts, thus it is
permanent solution to any dispute, as it don’t lead to appeal or revision, and hence reducing
the burden of appellate courts as well and also it saves valuable time and energy of the courts
which can be utilized erstwhile in other matters pending before court and it renders justice on
time (Justice delayed is justice denied, but ADR saves time and timely judgment is possible).
Despite many advantages of using Alternative dispute resolution mechanisms, our society has
been reluctant to give it its due recognition.

The ADR practitioner therefore acts like a healer of conflicts rather than a combatant, which
are very much similar to the Panchayat system we have in our villages. The resolution of
disputes through ADR is so effective and widely accepted that Courts have more often
recognized them. It avoids protracted litigation and is based on the ground realities verified in
person by the adjudicators and the award is fair and honest settlement of doubtful claims based
on legal and moral grounds.
 The procedures and techniques discussed above are the most commonly employed methods of
81

ADR. Negotiation plays an important role in each method, either primarily or secondarily.
However, there are countless other ADR methods, many of which modify or combine the above
methods. For example, it is not uncommon for disputants to begin negotiations with early
neutral evaluation and then move to nonbinding mediation. If mediation fails, the parties may
proceed with binding arbitration. The goal with each type of ADR is for the parties to find the
most effective way of resolving their dispute without resorting to litigation. The process has
been criticized as a waste of time by some legal observers who believe that the same time could
be spent pursuing the claims in civil court, where negotiation also plays a prominent role and
litigants are protected by a panoply of formal rights, procedures, and rules. But many
participants in unsuccessful ADR proceedings believe it is useful to determine that their
disputes are not amenable to a negotiated settlement before commencing a lawsuit.

Despite its success over the past three decades, ADR is not the appropriate choice for all
disputants or all legal disputes. Many individuals and entities still resist ADR because it lacks
the substantive, procedural, and evidentiary protections available in formal civil litigation. For
example, parties to ADR typically waive their rights to object to evidence that might be deemed
inadmissible under the rules of court. Hearsay evidence is a common example of evidence that
is considered by the parties and intermediaries in ADR forums but that is generally excluded
from civil trials. If a disputant believes that he or she would be sacrificing too many rights and
protections by waiving the formalities of civil litigation, ADR will not be the appropriate
method of dispute resolution.
 BIBLIOGRAPHY
82

PRIMARY SOURCES

 THE CIVIL PROCEDURE CODE, 1908.

 THE ARBITRATION AND CONCILIATION ACT, 2015.

 THE LIMITATIONS ACT,

 INDIAN CONTRACT ACT, 1872.

SECONDARY SOURCES

o Acharya. N.K, Law Relating to Arbitration and A.D.R. (2004), Asian Law
House. Aiyer.P. Ramanath, The Law Lexicon, The Encyclopaedic Legal
and Commercial Dictionary, (2002), Wadhwa and Co., Nagpur.

o Alexander Nadja Marie, Global trends in mediation, (2006) Kluwer

Law International.

o Baxi Upendra, The Crisis of The Indian Legal System (1982),

Tripathi Private Ltd Basu N.D., Basu’s Arbitration Act, 7th
Edition (1976), Eastern Law House.

o Basu N.D., Law of Arbitration and Conciliation, 10th Ed (2003),

Orient Publishing Company.

o Boulle, L. Mediation, Principles Processes Practices

(2005).

o Lexis Nexis Butterworths Bush, Robert A. Baruch, and Joseph

Folger. The Promise of Mediation: Responding to Conflict Through
Empowerment and Recognition. San Francisco, CA: (1994). Jossey-
Bass Publishers.
83

WEBSITES

 www.wikipedia.com
 www.rajyasabha.nic.in
 www.arbitrationindia.com
 www.supremecourtofindia.nic
 www.utplsa.pon.nic.in
 www.scconline.com
 www.labour.pondicherry.gov.in
 www.utplsa.pon.nic.in
 www.lawnet.com.au
 www.lawresearch.com
 www.lawworld.com
 www.legalservicesindia.com
 www.parliamentofindia.nic.in
 www.webjcli.nclac.uk
 www.mediationinlaw.org
 www.butterworths.co.uk.