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Question 1) What is ADR, pros, cons, scope and nature?

Alternative dispute resolution (ADR) refers to a range of dispute settlement methods,
which help the parties in the dispute to come to a settlement without going to court,
or without litigating on the said matter. These methods usually involve a third party,
who helps them in settling the disputes. In many cases, ADR methods are used
alongside the litigation process as well through court authorisation.

Pros of ADR

 It is less expensive.
 It is less time consuming.
 It is free from the technicalities that are present in the court system.
 The parties are free to differ in their opinion and can discuss their opinions
with each other, without any fear of disclosure of this fact before the courts.
 The process is also very flexible, according to what suits the parties.
 The parties also have the option of being confidential. The ADR system also
enables the parties to put focus on practical solutions.
 A wider range of issues are considered and shared future interests of the
parties are protected.
 ADR system also allows for risk management.

Cons of ADR

 ADR is not helpful where a dispute is to be decided based on a precedent.

 When there is a need for court and interim orders, ADR would not be useful.
 ADR is less suitable when there is a need for enforcement.
 When there is a need for live and expert evidence and analysis in a case, then
ADR would not be useful.
 When there is an imbalance of power, between the parties in the dispute,
then ADR would not work.
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The Nature and Concept of ADR

 The ADR resolution system covers the civil and commercial nature of disputes.
The mechanism of ADR with the help of various alternative techniques given
very encouraging results in several categories of disputes.
 The role of the third person is a basic concept in ADR. In ADR disputes are
settled with the assistance of a neutral third person. The neutral third person
is selected or appointed by the parties of their own choice and without fear or
favour in order to avoid any sort of bias.
 The basic concept of the ADR system is to resolve disputes. Whatever the case
may be, the basic concept is to manage and resolve the disagreements
between the parties at the lowest cost and with little adverse impact on
business activities.
 The mechanisms of the ADR system are economical, Common and voluntary,
this system results in huge savings to the litigant parties.

The objective of ADR system

The main objective of the mechanism of the ADR system is not to replace the judicial
procedural laws but to decrease the time taken for trial. Its few main objectives are
mentioned below –

 The ADR system provides cheap and speedy justice to the disputant.
 It aims to settle disputes on less lawyering.
 It aims to settle the dispute without any discord.
 It maintains confidentiality or keeping the information and disputes classified
and inside the organization is key to the ADR system.
 The most important aim is to avoid long judicial proceedings and trials
because it is an alternative mechanism.
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There are various ADR methods mainly:

 Arbitration
 Mediation
 Conciliation
 Negotiation

Mediation:

 It is a process wherein the parties themselves determine the terms of the

agreement and that will help them resolve the disputes.
 A Mediator only oversees the process and helps communicate among the
conflicting parties and is deemed impartial.
 There are private sessions where the mediator discusses the issue with
either of the parties in the absence of the other so that the parties do not
hesitate in sharing any information. Following this, there are joint sessions
where there is an attempt made towards settling the dispute.
 It is especially helpful in matrimonial and property disputes where there is
a need to understand the stage at which the dispute triggered and the
ways in which each party wants it to be resolved.
 Mediation is a voluntary and non-binding process, however, is regulated
by the Code of Civil Procedure, 1908.
 In Mediation proceedings, the ultimate decision to agree on the
settlement remains with the parties.
Pros of the mediation process
1. Settlements are done as per wishes of the parties,
2. Parties have control over the process of the mediation and its steps,
3. Proceedings are private and confidential,
4. Relationships are secured during mediation due to amicable settled guidelines
Cons of the mediation process:
1. Due to control of parties over proceedings, settlements may be hard to
achieve.
2. No judicial support for its applicable, because settlement is not enforceable.
3. No formal proceedings will occur but parties will decide the procedure.
4. Main issue may not be resolved due to none revealing of critical information
before the mediator.
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Conciliation
 In Conciliation, no prior agreement is needed between the parties, any party
can request the other party to appoint a conciliator.
 Conciliation is a voluntary proceeding, where the parties involved are free to
agree and attempt to resolve their dispute by conciliation.
 One or more Conciliators are appointed by the parties themselves, who acts
as a neutral third party.
 Like mediation, conciliation is a voluntary, flexible, confidential, and interest-
based process
 The main difference between the Conciliation and mediation is that in
mediation, the parties are encouraged to find a solution, with the facilitator
only acting as a guide. While with conciliation, the facilitator has the
responsibility to identify the objectives of the parties and activity to help find
a solution.
Pros of the conciliation process
 Process is informal and flexible in nature,
 Conciliator sometimes may be an expert of the dispute matter which has be
raised,
 Very economical process as compared to other methods.
 If parties are not satisfied with the proceedings, any party can approach the
court of law for redressal of the disputes.
Cons of the conciliation process
 No proceedings are binding upon their parties.
 Sometimes parties may not arrive at any settlement of the dispute.
 No settlement is enforceable by law nor there do any provision of appeal.

Negotiation
 Negotiation is self-counselling to resolve disputes; the aim of negotiation is
the settlement of disputes by exchange of views and issues concerning the
parties.
 It is Voluntary method of ADR andno party is forced to participate in a
negotiation.
 Negotiation occurs in business, non-profit organizations, and government
branches, legal proceedings, among nations and in personal situations such as
marriage, divorce, parenting, and everyday life.
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 There is no need for recourse to a third-party neutral. This is important when

none of the parties wants to involve outside parties in the process
 Negotiation involve two, three or dozens of parties. They can range from two
individuals seeking to agree on the sale of a house to negotiations involving
diplomats from dozens of States (e.g., World Trade Organization (WTO)).
 Opting for negotiation instead of litigation may be less expensive for the
parties and may reduce delays.
Pros of the negotiation process
 Process is flexible and very much informal in nature,
 Healthy relations can be maintained and enhanced between the parties to
dispute,
 Very flexible and confidential processes,
 It is a very quick process as compared to other ADR methods.
Cons of the negotiation process:
 Very less chances of settlement.
 Not enforceable before any court of law.
 Parties can protect their rights resulting in no settlement or no negotiation.

Lok Adalat
 Lok Adalat is called ‘People’s Court’ presided over by a sitting or retired
judicial officer, social activists, or members of the Legal profession as the
chairman.
 National Legal Service Authority(NALSA) along with other Legal Services
Institutions conducts Lok Adalats on regular intervals for exercising such
jurisdiction.
 These Parties are in direct interaction with the judge, which is not possible in
regular courts.
 Any case pending in regular court or any dispute, which has not been brought
before any court of law can be referred to Lok Adalat.
 There is no court fee and no rigid procedural requirement (i.e. no need to
follow the process given by the Civil Procedure Code or Evidence Act)
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Question 2)

Difference between ADR & Judical System

JUDICAL PROCESS ADR

Judicial process is an adjudicatory process Arbitration is a quasi-judicial
where a third party (judge/ Other adjudicatory process where the
authority) decides the outcome. arbitrator(s) appointed by the Court
or by the parties decide the dispute
between the parties.

Procedure and decision are governed, Procedure and decision are

restricted, and controlled by the provisions governed, restricted and controlled
of the relevant statutes. by the provisions of the Arbitration &
Conciliation Act, 1996.
The decision is binding on the parties. The award in an arbitration is binding
on the parties

Adversarial in nature, as focus is on past Adversarial in nature as focus is on

events and determination of rights and determination of right sand liabilities
liabilities of parties. of parties.
Personal appearance or Personal appearance or
active participation of parties is not always active participation of parties is not
required always required.
A formal proceeding held A formal proceeding held
in public and follows strict procedural in private following strict procedural
stages stages
Decision is appealable Award is subject to challenge on
specified grounds
No opportunity for parties to communicate No opportunity for parties to
directly with each other. communicate directly with each
other.
Involves payment of court fees Does not involve payment of court
fees

In summary, alternative dispute resolution and judicial dispute resolution differ in

terms of voluntariness, decision-making authority, informality, confidentiality,
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timing, cost, outcome variety, and the role of the court. Parties should consider their
specific needs and circumstances when choosing between these two approaches to
dispute resolution.

Types of arbitration
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The kinds of arbitration agreement may be categorized based on the territorial

jurisdiction, i.e. the place whereby matters are being dealt with. It may also depend
upon the laws agreed upon to apply on the legal relationship of parties concerned.
Based on this, the types of arbitration in India are classified.

1- Domestic Arbitration

When there is a dispute among two parties sharing a legal relationship whereby both
of them are residing or located in India, such a resolution of dispute through
arbitration is termed as domestic arbitration. In such cases, there is least confusion
regarding applicable laws for deciding the matters. The arbitration lawyers in India
help with representation of parties before the arbitration tribunal.

2- International Arbitration

When one of the parties belongs to countries other than India and the dispute is
being resolved through arbitration as per Indian laws, it is called international
arbitration. Presence of an international element is obvious in such cases. The
matters under international arbitration are usually resolved beyond Indian territory.

3- International Commercial Arbitration

Where there is an international element in a commercial dispute whereby one of the

parties (individual or body corporate) is Indian, resolution of disputes arising is done
through laws as agreed upon in the contract. Where there is a lack of specific terms
regarding dispute resolution or an agreement to follow Indian laws, the arbitration
and mediation rules applicable in India are followed thereby. Such an arbitration
process is called International commercial arbitration.

4- Institutional Arbitration

Types of arbitration include when there is a particular institution selected by the

parties to contract in the arbitration clause, such an institution is responsible for
dispute resolution through arbitration. In such cases, parties may not be required to
go through the hassle of selecting the arbitrator while the institution takes charge for
such tasks. Institutional arbitration helps efficient dispute resolution.

5- Ad-Hoc Arbitration

When there is no contractual compulsion and parties agree for deciding matters via
arbitration through mutual consent, it is termed as ad-hoc arbitration. It is one of the
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most common types of arbitration in India. In such cases, parties to dispute may
mutually decide the process to be followed during arbitration.

6- Fast Track Arbitration

Section 29B of Arbitration and Conciliation Act, 1996 provides for fast track
procedure of arbitration. Among the other kinds of arbitration, this is the most
efficient way of dispute resolution through arbitration. Things are usually summed up
in documents to speed up things.

7- Contractual Arbitration

A contract is an official document in which several terms are agreed upon by the
parties. Sometimes, parties to a contract include an arbitration clause that clarifies
referring any dispute to arbitration before heading towards the courts. In such cases,
terms mentioned in the arbitration clause decide the way parties go ahead with
dispute resolution through an arbitrator.

8- Statutory Arbitration

There are some laws or statutes, which specify dispute resolution through arbitration
only. While dealing with legal relationships under such laws, arbitration is the way
out for settling the disputes.

9- Foreign Arbitration

When one of the parties is Indian and they have mutually agreed to follow rules of a
foreign land through arbitration while dealing with legal disputes, it is called foreign
arbitration. In such cases, regardless of whether the arbitration takes place in India
or or the other country, foreign arbitration laws are followed.
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Article 1. Scope of application

(1) This Law applies to international commercial** arbitration, subject to any

agreement in force between this State and any other State or States.

(2) The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the place
of arbitration is in the territory of this State.

(4) For the purposes of paragraph (3) of this article:

(a) if a party has more than one place of business, the place of business is that which
has the closest relationship to the arbitration agreement;

(b) if a party does not have a place of business, reference is to be made to his
habitual residence.

(5) This Law shall not affect any other law of this State by virtue of which certain
disputes may not be submitted to arbitration or may be submitted to arbitration only
according to provisions other than those of this Law.

SECTION 7

Forms of Arbitration Agreement

A fundamental requirement under Section 7 of the 1997 Act is that an arbitration

agreement shall be in writing. Besides that, Section 7 grants liberty to the parties to
form an arbitration agreement in multiple ways as enumerated below:

A standalone separate Arbitration Agreement

A separate arbitration agreement can be formed in addition and reference to the

operative agreement between the parties.

An Arbitration Clause

An arbitration clause can be formed in the operative agreement as to the section of

the agreement that deals with the rights and options of the parties in the event of a
legal dispute arising out of the contract. An arbitration clause is construed as an
arbitration agreement.
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SECTION 8

Introduction

Section 8 of the Arbitration and Conciliation Act, 1996 deals with the power of the
judicial authority to refer the parties to arbitration. The crux of the provision is that if
there is an arbitration agreement between the parties and a dispute arises between
the parties which is a subject matter of arbitration, then the judicial authority before
whom either of the parties has brought the case is obligated under Section 8 of the
Arbitration and Conciliation Act, 1996 to direct the parties to resolve their dispute
through arbitration. To amplify the scope of arbitration, the 2015
Amendment to Section 8 of the said Act mandates the judicial authority to refer the
parties to arbitration irrespective of any decree/court order/judgment. This section is
based on Section 34 of the erstwhile Arbitration Act, 1940.

Essential ingredients of Section 8 of Arbitration and Conciliation Act,1996

By the plain reading of the Section, it can be inferred that the following are the
essential ingredients of it-

 There should be a valid arbitration agreement between the parties.

 Action should be brought before the judicial authority and that action should
be a subject matter of the arbitration.

 Either of the parties or any person related to the dispute should invoke the
arbitration clause or agreement before the date of submitting their first
statement on the substance of the dispute before the judicial authority.

 The application of the party to refer the case to arbitration should be filed
with the original arbitration agreement or its duly certified copy.
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SECTION 9

Introduction

Arbitration, as a method of alternative dispute resolution, has gradually become

immensely popular in India where the Courts are burdened with a huge number of
pending cases making the process of litigation expensive, time-consuming and
exhaustive. However, the contracting parties may also need an interim relief and
protection by the Court before, after or during the procedure of arbitration or just
after passing the arbitral award.

Section 9 of the Arbitration and Conciliation Act, 1996 provides relief to the party in
such situations by granting interim by Court.

Synopsis of Section 9 of Arbitration and Conciliation Act, 1996

Section 9 of the Arbitration and Conciliation Act, 1996 deals with interim relief in an
arbitration proceeding. It entitles any party to obtain an interim relief at three stages
–

 Before the commencement of the arbitration proceedings

 During the course of arbitration proceedings

 After when the arbitral award is given but before its enforcement

 Though arbitration is supposed to be undertaken by the arbitral tribunal

alone, the Act recognises the fact that the rights of the parties should not be
frustrated. Hence, in a period when the tribunal may not be in existence, the
parties may approach the Court for relief.

SECTION 10 & 11

Appointment of the arbitrator

Section 10 of this Act provides that parties have the power to decide the number of
arbitrators but such numbers shall not be an even number. However according to
Section 11, the parties are free to decide the procedure of appointment of arbitrator
or arbitrators in the arbitration agreement but when no such procedure is
determined, then each party is required to appoint one arbitrator and the two
arbitrators so appointed must have to appoint the third one. If the parties fail to
appoint the arbitrator according to the above procedure within 30 days from the
date of request made or the arbitrators appointed fail to agree on one person, any
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party may request the Chief Justice to nominate an arbitrator to them. However, if
the parties have not agreed on the procedure of appointing one arbitrator or fails to
agree on one person within 30 days from the receipt of a request made by another
party, the nomination shall be made by the Chief Justice on the request of one of the
parties. However, where an appointment procedure has been agreed upon by the
parties, but the parties fail to act as required, a party may request the Chief Justice to
nominate an arbitrator and then the decision of Chief Justice is final.

SECTION 12 & 18

Duties to be independent and impartial

Section 12 and Section 18 of The Arbitration and Conciliation Act, 1996 imposed an
important duty on the arbitrator that in any arbitration proceeding that he must
have to be independent and impartial. By being independent it means that there is
no such personal or professional relationship between the arbitrator or parties which
may affect the final judgment, however, by impartial, it means that the arbitrator
should neither favor nor oppose any party and should give equal treatment to both
parties.

Duty to disclosure

According to Section 12 of this Act, there is an obligation on an arbitrator to disclose

all the relevant facts which are required to be known by both parties at the time of
his first encounter with them.

In the case of Steel Authority of India v. British Marine 2016, the Court said that the
arbitrator must have to disclose all such facts which are likely to affect impartiality or
which might create an appearance of partiality or bias.

SECTION 13

Procedure for challenging an arbitrator:

Section 13 of the Act provides liberty to the parties to agree on a procedure for
challenging an arbitrator. However, if the parties are unable to reach an agreement
for the said purpose, a party who intends to challenge an arbitrator shall, within
fifteen days after becoming aware of the constitution of the arbitral tribunal or after
becoming aware that circumstances exist that give rise to justifiable doubts as to his
independence or impartiality or he does not possess the qualifications agreed to by
the parties, send a written statement of the reasons for the challenge to the arbitral
tribunal. The arbitral tribunal is required to decide on the challenge, if the arbitrator
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does not withdraw from his office or the other party does not agree to the challenge.
In case of failure of challenge, the arbitral tribunal shall continue the arbitral
proceedings and make an arbitral award. Where such an award is made, the party
challenging the arbitrator may make an application for setting aside such an award in
accordance with Section 34 of the Act and if the award is set aside on such an
application, the Court may decide as to whether the arbitrator who is challenged is
entitled to any fees.

SECTION 14

Termination of mandate of an arbitrator and substitution of arbitrator:

Further, Section 14 of the Act provides that the mandate of an arbitrator shall
terminate and he shall be substituted by another arbitrator, if-

He becomes de jure or de facto unable to perform his functions or for other reasons
fails to act without undue delay; and

He withdraws from his office or the parties agree to the termination of his mandate.

SECTION 15

Section 15 provides additional circumstances under which the mandate of an

arbitrator shall terminate. These include-

Where the arbitrator withdraws from office for any reason; or

By or pursuant to agreement of the parties.

It is further if where the mandate of an arbitrator terminates, a substitute arbitrator

shall be appointed. The same rules shall be followed in appointing a substitute
arbitrator which were applicable to the appointment of the arbitrator being
replaced. Where an arbitrator is replaced, any hearing previously held may be
repeated at the discretion of the arbitral tribunal, unless otherwise agreed by the
parties. However, it is provided that an order or ruling of the arbitral tribunal made
prior to the replacement of an arbitrator shall not be invalid solely because there has
been a change in the composition of the arbitral tribunal, unless otherwise agreed by
the parties.
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SECTION 17

Power to take interim measures

According to Section 17 of this Act, when any party during the arbitration proceeding
or at any time after making of the arbitral award, may seek the interim measure
before the arbitration tribunal. The arbitration tribunal has the power to take an
interim measure relating to:

Appointment of guardian for minor or person of unsound mind;

For the protection of:-

 Interim custody and sale of goods which are subjected to the arbitration
agreement;

 Securing amount which is disputed in the arbitration;

 Detention, prevention or inspection of any property or thing which is

subjected to arbitration;

 Appointment of receiver;

 Such other interim measure is necessary for the eyes of the Court.

SECTION 19

To determine the rule of procedure

According to Section 19 of the Arbitration and Conciliation Act, 1996, the arbitration
procedure is not bound by any code of procedure. The arbitration organisation
assigned the task of setting up the tribunal for a particular arbitration case defines
the rules for conducting the arbitration proceedings. Most of these rules are pre-
defined by the organisation, and some rules are interpreted during the course of the
proceedings. These have to comply with the other laws of the country.

SECTION 20

Duty to determine time and place of arbitration

According to Section 20 of this Act, it is the duty of the arbitrator to appoint the time
and place of arbitration if the parties have failed to decide it amongst themselves.
But at the time of determination, the arbitrator must keep in mind the circumstances
including the convenience of the parties. The arbitrator unless otherwise agreed by
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the parties, also has the power to decide other places to hear the witness or expert
or to an inspection of documents, goods, and other property.

Section 21 in THE ARBITRATION AND CONCILIATION ACT, 1996

Commencement of arbitral proceedings.—Unless otherwise agreed by the parties,

the arbitral proceedings in respect of a particular dispute commence on the date on
which a request for that dispute to be referred to arbitration is received by the
respondent.

SECTION 22

Language to be used in Arbitral Proceedings

Section 22 of the Act deals with the language which has to be used in arbitral
proceedings. The parties to the arbitration agreement are free to choose the
language or languages which have to be used in the arbitral proceedings. In cases
where the parties fail to arrive at such an agreement then it is the role of the arbitral
tribunal to determine the language or languages to be used in the arbitral
proceedings. The language shall also apply to any written statement by a party, any
hearing and any arbitral award, decision or other communication by the arbitral
tribunal.

SECTION 23

Statement of Claim and Defence

Section 23 of the Act provides for pleadings of the parties before the arbitral
tribunal. After the arbitral tribunal has been established, the usual practice is to
exchange and file their pleadings before the tribunal.

The claimant states the facts and other relevant matters, while the respondent
opposes the facts and the averments made in the claim statement and contests the
relief claimed by the claimant. The contents of pleading may vary from case to case
depending upon the facts and circumstances of each case.

Within six months of the appointment of the arbitral tribunal, the statement of claim
and defence has to be completed under this section.
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SECTION 24

Hearing and written proceedings

Section 24 of the Act discusses the manner in which arbitral proceedings are to be
conducted. In the absence of any prior agreement between the parties relating to
this matter, the arbitral tribunal has the power to decide whether the proceedings
shall be held orally or on the basis of documents and other materials.

SECTION 25

Power to proceed to ex-parte

In any arbitration proceeding, the arbitrator has the power to proceed to ex-parte i.e
in the favor of one party if another party contravenes any provision of this Act.
According to Section 25, there are three conditions under which the court may pass
an ex- parte award:

 When the claimant fails to communicate his statement of claim in accordance

with Section 23(1) of the Act.

 When the respondent fails to communicate his statement of claim in

accordance with Section 23(1) of the Act.

 When any party fails to appear at an oral hearing or to produce the document
or to produce documentary evidence.

The court, however, doesn’t proceed ex-parte against any party without giving him
the notice regarding the court’s intention to proceed ex parte on a specific date, time
and place.

SECTION 26

Power to appoint an expert

According to Section 26 of the Act, the arbitrator has the power to appoint one or
more experts to report to him on a specific issue, if he finds it necessary in any case.
The arbitrator also has the power to give the expert any relevant information or
documents or property for the purpose of his inspection. If necessary the arbitrator
also has the power to appoint the expert as a participant in a hearing but in order to
appoint an expert, the expert must have to show the parties that he has expertise in
matters related to this case.
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SECTION 27

Court Assistance

Section 27 of the Act provides the arbitral tribunal with the power to apply for the
court assistance in taking evidence. Persons can also be held guilty and tried before
the court, if they refuse to give evidence or do not cooperate.