In this article, Aparna Jayakumar, from GGSIPU, She throws an insight on alternative dispute resolution (ADR) as an alternative recourse to litigation.
Table of Contents
Introduction
The use of alternative dispute resolution mechanisms to expedite the administration of justice is an important concern. The first step was taken in India in 1940 when the first Arbitration Act was enacted. However, the provisions could not be completely enforced due to several loopholes and problems in the law. However, several years later, in 1996, the Arbitration and Conciliation Act, which was based on the United Nations Commission On International Trade Law Model (UNCITRAL model, hereinafter), was passed. Sufficient provisions in the field of Lok Adalats have been developed and amended to assist the rural and commoner segments in making the most of this specific alternative dispute resolution mechanism in India.
It is difficult to eliminate disagreements and disputes in any culture, and human society evolves as a result of contradictions between people. India is a sovereign, socialist, democratic, secular and republic. The Constitutional aim is to establish an equal society and to provide justice, social, economic, and political protection to all of its people. It is the responsibility of the state to ensure citizens’ access to justice by providing judicial and non-judicial dispute resolution forums that provide timely and meaningful justice and protection of their legal and fundamental rights. In violation of Articles 14 and 39, the State should violate this fundamental principle.
Alternative dispute resolution – an indispensable need of the Indian legal system
About ADR
Alternative dispute resolution (ADR) contains an important tool for providing timely and cost-effective justice; it also has the ability to reduce the massive backlog of cases. ADR’s primary methods are non-judicial in nature. Alternate dispute resolution (ADR) refers to a variety of methods for resolving disputes outside of the traditional judicial system, such as mediation, arbitration, and conciliation.
Modes of alternative dispute resolution in India
In India, the following modes of ADR are used:
Arbitration
The concept of ‘arbitration’ in Section 2(1)(a) is a verbatim reproduction of Article 2(a) of the Model Law: ‘arbitration implies any arbitration, whether or not performed by a permanent arbitral institution.’ It is a process in which the dispute is referred to as an arbitral tribunal, which makes a binding decision (an “award”) on the dispute. It is a private, usually informal, and non-judicial dispute resolution process. The principle of arbitration has four requirements: an arbitration agreement, a dispute, a referral to a third party for decision, and an award by the third party. Nature is that it is a venue chosen by the parties with the purpose of acting judicially after considering relevant facts before it and the parties’ submissions. As a result, if the preferred venue is not expected to behave judicially, the procedure is not arbitration.
Mediation
Mediation is a mechanism in which the mediator, an impartial third party, works with the parties to reach an agreement that is agreeable to all of them. The primary goal of mediation is to give the parties the opportunity to discuss, converse, and explore solutions with the assistance of a neutral third party in order to decide whether or not a solution is feasible. Mediation is the process of negotiating with the help of a third party. In comparison to an arbitrator or a judge, the mediator does not have the authority to enforce a decision on disputing parties. Regardless of the absence of ‘teeth’ in the negotiating process, the presence of a mediator changes the nature of negotiations. The principle of mediation is not new to the Indian legal system, as various aspects of mediation have existed. The Arbitration and Conciliation Act of 1996 is written in such a way that it is primarily concerned with business transactions involving the common man rather than the common man’s interests.
Conciliation
Conciliation is described as “a process in which a neutral individual communicates with the parties to a potentially resolved dispute; a relatively unstructured form of dispute resolution in which a third party encourages dialogue between parties in an effort to help them settle their differences.” This is an effort by a third party, chosen by the litigants, to reconcile them either before or after they return to litigation (whether in court or by arbitration). Conciliation attempts are usually focused on showing each side the opposing sides of the conflict in order to bring each side together to find a compromise.
Negotiation
Negotiation-communication with the aim of persuasion- is the dominant form of conflict resolution. When compared to procedures involving mutual third parties, it has the benefit of allowing the parties to manage the process and the solution. Negotiation does not have constitutional approval in India. Negotiation is the self-counselling of the parties in order to settle their disagreement. Negotiation is a mechanism with no set rules but a consistent pattern.
Case laws
Cheran Properties Ltd. v. Kasturi and Sons Ltd. & Ors.
Although recognizing the concept enunciated in Chloro Controls that a non-signatory could be bound by an arbitration agreement in such situations, the Court held that the community of companies doctrine is primarily intended to promote the fulfilment of a mutually held intent between the parties, where the circumstances suggest that the intent was to bind both signatories and non-signatories. The effort is to dig up the true nature of the business agreement and to unravel from a layered system of commercial contracts, and aim to bind someone who is not officially a signatory but has assumed the duty to be bound by the acts of a signatory.
The Supreme Court’s decision exemplifies the court’s strategy to expedite the execution of arbitral decisions by identifying and utilising powers of competent fora other than civil courts to carry out ordered remedies. The power of NCLT to implement an award that commanded the transmission of shares was discovered and recognised by the Court in this instance. It’s worth noting that this authority would be limited to specified cases under the Companies Act that necessitate approaching the NCLT for execution.
The Court has ruled out a potential additional layer of arbitral award execution as a court decree, i.e., approaching the court that has jurisdiction over the arbitral proceedings first, then the court within whose territory the assets are located or the appropriate remedy (as in the case) can be sought. By declaring that the NCLT can enforce arbitral judgements relating to the transmission of shares, the Court has taken a dynamic approach. However, it is unclear how courts would handle circumstances in which an arbitral ruling authorises remedies that can be carried out by multiple competent fora.
Nonetheless, this is a positive change, especially in light of another recent Supreme Court decision that said that execution proceedings can be started anywhere in the country without the need for a transfer decree from the court that had jurisdiction over the arbitral proceedings. The Supreme Court’s enforcement-friendly approach will undoubtedly make it easier to carry out arbitral rulings in India and encourage a fast-paced environment.
Uttarakhand Purv Sainik Kalyan Nigam Ltd. Vs. Northern Coal Field Ltd
The Supreme Court held that the question of restriction would be determined by an arbitrator based on the doctrine of kompetenz – kompetenz enshrined in Section 16 of the Arbitration & Conciliation Act, 1996 (Arbitration Act) and the legislative intent to limit judicial interference at the pre-reference level. It also reaffirmed that the Arbitration Act’s statutory purpose is for party autonomy and limited judicial intervention in the arbitration process. It was noted that the Arbitration Act’s regime states that once an arbitrator is called, the arbitrator must resolve all objections and issues. The Supreme Court observed that the issue of limitation is a jurisdictional issue that should be determined by the arbitrator in accordance with Section 16 of the Arbitration Act, rather than by the High Court at the pre-reference point in accordance with Section 11 of the Arbitration Act. It also stated that once the arbitration arrangement is not in question, the arbitrator must resolve all issues, including jurisdictional issues.
The 2015 Amendment Act, according to the Apex Court, made a fundamental alteration in the appointment procedure under Section 11: the scope of authority under subsection (6A) of Section 11 was limited to examining the presence of the arbitration agreement at the preference stage. The Court is now only compelled to consider the existence of the arbitration agreement according to the legislative mandate contained in Section 11(6A) of the Act. Section 16, which enshrines the Kompetenz Kompetenz concept, leaves any other preliminary or threshold questions to be addressed by the arbitrator. The doctrine of “KompetenzKompetenz,” also known as “CompétenceCompétence” or “Compétence de la Reconnaissance,” states that the arbitral tribunal has the authority and competence to rule on its own jurisdiction, including determining all jurisdictional issues and the existence or validity of the arbitration agreement.
This theory is meant to limit judicial intervention so that the arbitral procedure is not stymied at the outset when one of the parties raises a preliminary objection. The notion of kompetenz kompetenz is, however, susceptible to an exception, which is when the arbitration agreement is challenged as having been obtained by fraud or deception. This exception would also apply in circumstances where the parties were in the middle of a negotiation and had entered into a draught agreement as a prelude to signing the final contract. When considering the case of M/s Indian Farmers Fertiliser Cooperative ltd. versus Bhadra Products, the Apex Court stated that the issue of limitation is a jurisdictional issue that must be addressed by the tribunal under Section 16 of the Act.
Konkan Railways Corp Ltd Vs. Mehul Construction Co, AIR 2000
A three-judge bench of the Supreme Court ruled that the Chief Justice’s order appointing arbitrators in domestic arbitrations and the Chief Justice of India’s order in international commercial arbitrations shall be considered to have been made in his administrative capacity, and the aggrieved party could challenge the decision under Section 16 of the Arbitration Act, for challenging the jurisdiction of the tribunal.
Goel Construction Co. Pvt. Ltd. v. ICAI O.M.P. (T) (Comm.)
The Court found that the Arbitrator was under the impression that he was not required to reveal the other applicable aspects of the Act’s Sixth Schedule. Furthermore, the Court determined that compliance with the major requirements of the said Schedule is insufficient, and ordered the Arbitrator to provide full disclosure in accordance with the Act’s Sixth Schedule.
Mahanagar Telephone Nigam Limited Vs. Canara Bank & Ors
Invoking the theory of “Group Companies,” the Supreme Court allowed a non-signatory to an arbitration agreement to engage in the proceedings. A non-signatory may be bound by an arbitration agreement if the parent or holding firm, or a member of the group of companies, is a signatory to the arbitration agreement and the non-signatory party on the group has been involved in the negotiation or performance of the commercial contract or has made comments indicating its intention to be bound by the contract, according to the Supreme Court.
The related contracts will bind and support the non-signatory as well. The Supreme Court found ample historical precedent, in this case, to conclude that the parties agreed to bind the non-signatory party to the arbitration proceedings.
Conclusion
Based on the above analysis, it is possible to infer that the constitution contains the fundamentals of an alternative conflict settlement process. The state has a legal obligation to pass legislation and have an alternative dispute resolution process. The legislature has recognized this, as well as the implementation of alternative dispute resolution and alternative dispute resolution mechanisms by different statutes. There is a strong desire to create an alternative model of access to justice.
Alternative dispute resolution processes are said to be versatile, inexpensive, fast, and less formalistic, making them a viable alternative to court-based adjudication. Aside from the court process, there are alternative conflict resolution options for simple disputes at the discretion of the parties. India is making strides for judicial equality. The ADR structure serves as a stepping stone for both parties to ascend the justice ladder. The ADR movement must be pushed forward at a faster pace. Apart from delivering instant justice at the doorstep at no expense, this would significantly reduce the burden on the courts. If they are effectively implemented, they will accomplish the purpose of providing social justice to the disputing parties.
References
- https://www.barandbench.com/columns/50-landmark-decisions-on-arbitration-law-in-india-2018-2019-part-i
- https://blog.ipleaders.in/aibe-adr/#:~:text=It%20was%20held%20by%20a,the%20Arbitration%20and%20Conciliation%20Act
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