This article is written by Shubhangi Sharma, 5th year student of BA LLB in Lloyd Law College, Greater Noida. The article explains about the forms of ADR and their procedure.
Table of Contents
Arbitration, Conciliation and Mediation are the Alternative Dispute Resolution for solving civil nature disputes. These are dispute resolution methods to deal with disputes on a broad and global scale. Through these methods one can resolve their disputes without access to the regular judicial system, i.e. judicial courts. The Article 39A of the Indian Constitution clearly states that The State shall secure that the operation of the legal system promotes justice, on a basis of equal opportunity, and shall, in particular, provide free legal aid, by suitable legislation or schemes or in any other way, to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities.
So, to implement their orders, the Parliament came up with various alternative dispute Resolution (ADR) methods such as arbitration, conciliation, mediation etc to strengthen the judicial system of the country. Not only Constitution , CPC also provide Section 89 Order 10 Rule 1-A to 1-C to the parties to opt for ADR processes. In recent years, ADR has gained worldwide recognition among the general public and also in legal world. It is a cost effective method to resolve disputes as trial is the expensive one. ADR procedures are generally more flexible than court procedures. ADR is provides speedier mechanism to resolve a matter in dispute rather than the court system.
Arbitration is like a court procedure because the parties submit evidence similar to a trial where the third party hear the entire situation and give his decision which is binding upon the parties. In the case of Collins v Collin, the Court held that “An arbitration is a reference to the decision of one or more persons, either with or without an umpire, of some matter or matters in difference between the parties.” an arbitrator listens to the evidence which is brought by both parties and makes a decision which is generally binding upon both parties. Arbitration means getting an arbitral award on an ongoing conflict, by the arbitrator. In the process of arbitration, the cause is heard and determined between the parties in a dispute before the person selected by the parties or appointed under statutory authority i.e., The Arbitration and Conciliation Act, 1996. The objective of Arbitration is to settle the dispute which arose between the parties by one or more arbitrators appointed by them by going through the documents and evidences. According to Kurt Brenn “The objective of arbitration is not compromise but adjudication through the parties are at liberty to comprise.” A wise arbitrator would certainly promote such agreement, but as a rule there is no zest, if there is compromise in arbitral awards. While taking a decision in arbitral matter, the arbitrator must consider the fact that the decision imparted by him must be in the interest of principle of natural justice.
Arbitration can be done by voluntary or compulsory method. In Voluntary arbitration, if a dispute arose between the two Parties and they are unable to resolve their differences by themselves, thereby the parties agreeing to present their Dispute to the fair authority and the decision will be binding upon both parties. Whereas Compulsory arbitration, is the method where the parties are required to accept arbitration without any willingness on their part. When one party in any industrial dispute feels aggrieved by the act of the other party, it may approach the appropriate government to refer the dispute to any organization of adjudication for the settlement. The arbitrator or arbitral tribunal consists of a neutral person or persons responsible for resolving the dispute that the parties have submitted before them.
The number of arbitrators and their appointments are defined in Section 10 and 11 of Arbitration and Conciliation Act, 1996. The person from any nationality can be appointed as arbitrator, unless agreed by the parties. The number of arbitrators must be in odd number or there can be a sole arbitrator. The parties in conflict are free to appoint the arbitrator or they can approach the statutory authority for the same. In arbitration, if there are three arbitrators then each party will choose one arbitrator and the two appointed arbitrator will choose one arbitrator who will act as presiding officer. If the parties failed to appoint an arbitrator within 30 days as requested by the other party or the appointed arbitrators have failed to come on same page in appointing the arbitrator within 30 days or they have any kind of disagreement, then they can approach the chief justice or the other person or institution nominated by him regarding the appointment.
The Fifth Schedule to the Act (Annexure-A) are enlisted with the grounds which give rise to justifiable doubt as to the independence or impartiality of an arbitrator. The Seventh Schedule (Annexure-B) consists of the grounds which make a person ineligible to be appointed as an arbitrator.
In International Commercial Arbitration, the arbitrators will be appointed by the Chief Justice of India or by the person or institution nominated by him who will be of a nationality other than the nationality of the parties.
The arbitration agreement is defined as written under Section 2 (a) of the Arbitration Act, 1940 i.e. written agreement which present current or future dispute of parties to arbitration , irrespective of the name of the arbitrator in it or not. An arbitration agreement or an arbitration clause in an agreement is sometimes termed as ‘submission’. Arbitration agreement is also termed as ‘reference’. The arbitration agreement defined by Halsbury, ‘It is an agreement made by two or more parties between whom some difference has arisen or may hereafter arise whereby they appoint another person to adjudicate upon such dispute and agree to be bound by his decision. There are some essentials which needs to follow for a valid arbitration agreement like the agreement must be in a written form containing minimum terms of arbitration. The important objective of written agreement is that the parties should agree to resolve the dispute through arbitration. It must contains the essential elements of a valid contract such as offer and acceptance, competent parties, consent, lawful consideration etc. The features of arbitration are that it is a private tribunal chosen by the parties. A person appointed to resolve the differences or disputes is called an ‘Arbitrator’, the proceeding is termed as ‘Arbitral Proceeding’ and the decision imparted is termed as ‘Award’. Signing an Arbitration Agreement also leads to giving up important rights. So, before signing the agreement, one should properly read the terms of agreement and must reject or negotiate upon the inconvenient terms.
Landmark cases on arbitration
R.V. Solutions Pvt. Ltd. v. Ajay Kumar Dixit & Ors. In this case, The Delhi High Court held that a non-signatory or third party can only be subjected to arbitration in exceptional cases without its consent. The arbitrator is required to form a direct relationship with the signatory party of the agreement, or between the parties in the agreement or the equality of the subject or the overall transaction.
Garware Wall Ropes Ltd. v. Coastal Marine Constructions & Engineering Ltd, the court states that The High Court should stop the instrument which has not imposed stamp duty and hand it over to the authority which will then decide to implement the payment of stamp duty and penalty (if any) at the earliest, and preferably a period of 45 days. . Within the date on which the instrument of authority is received. As soon as the stamp duty is paid on the instrument, either party can bring the instrument to the notice of the High Court which will then proceed to hear and dispose of the Section 11 application expeditiously.
BHEL v. Uttar Pradesh Rajya Vidyut Utpadan Nigam Limited. The Supreme Court held that where the parties do not insist on the exclusive jurisdiction clause in an agreement or raise such objection, and by their conduct, waive such condition / submit themselves to the jurisdiction of another court , It cannot be said that exclusive jurisdiction shall be without jurisdiction except in the court in which it is vested.
Paschimanchal Vidyut Vitran Nigam Limited v. M/S IL & FS Engineering & Construction Company Limited O.M.P The question before the Delhi High Court was whether the provisions of the Fourth Schedule to the Act relating to fees to be paid to arbitrators would apply to domestic ad hoc arbitration where the parties have not approached the court to constitute an arbitral tribunal.
It was held that the provision in respect of fees contained in Section 11 (14) of the Act is only a competent provision. The concerned High Court has been given to frame the rules, if it chooses to do so. Since the parties did not approach the court for the formation of the Arbitral Tribunal, the Court would have no role in deciding the fees of the Arbitral Tribunal as there is no such power vested in the Court. Further, the provisions of sub-Section (14) of Section 11 clearly show that the fee prescribed in the fourth schedule of the Act is only suggestive.
Conciliation means settling disputes without litigation. It is an informal process in which conciliator i.e. third party tries to bring the disputants to agreement. He overcomes the disputable issues by lowering the tension, improvement in communication, interpreting issues, providing technical assistance, exploring potential solutions and bringing the negotiated settlement before the parties. Conciliator adopts his own method to resolve the dispute and the steps taken by him are not strict and legal. There is no need of agreement like arbitration agreement. The acceptance of settlement is needed by both of the parties.
Part III of the Arbitration and Conciliation Act, 1996 deals with conciliation. it is a voluntary proceeding where parties in dispute agree to resolve their dispute through conciliation. It is a flexible process which allows the parties to decide the time and place for conciliation, structure, content and terms of negotiations. In Conciliation, the conciliators are trained and qualified neutral person who help the conflicting parties to make them understand the issues in dispute and their interest to reach mutually accepted agreements. The conciliation process includes the discussion between the parties which is made with the participation of the conciliator. It covers many disputes like industrial disputes, marriage disputes, family disputes etc. This allows the parties to control the output of their dispute. The result is also likely to be satisfactory.
Conciliator is the third party who is involved in settling the dispute of the parties. Generally, there is one conciliator for the settlement but there can be more than one conciliator, if the parties have requested for the same. If there is more than one conciliator then they will act jointly in the matter. Section 64 deals with the appointment of conciliator which states that if there is more than one conciliator then the third conciliator will act as the Presiding Conciliator.
Kinds of Conciliation
- Voluntary Conciliation- In this method parties can voluntarily participate in the process of conciliation for resolving their dispute.
- Compulsory Conciliation- If parties do not want to take the opportunity of voluntary conciliation then they can go for compulsory conciliation. In this method, if the parties do not want to meet the other party to resolve the dispute then the process is said to be compulsory. This method is commonly used in labour cases.
Procedure of Conciliation
The objective of the conciliation proceedings is to reach upon mutual terms, speedy and cost-effective settlement of the dispute. Section 62 discuss the initiative of conciliation will start when one party will send Written Invitation to conciliate upon the matter to the other party. There will be the commencement of procedure if the other party accepts the invitation in writing to conciliate. If the other party rejects the invitation or the party who is willing for the conciliation does not get a reply from the other party within Thirty days then it will be treated as a Rejection of the Invitation.
Section 65 explains the submission of the statements of both the parties to the conciliators. Each party should submit a brief written statement regarding dispute as requested by the conciliator. The statement should describe the general nature of the dispute and the points of issue. Each party should send a copy of their statement to the other party. The conciliator can also ask for the submission of written statements which includes issues of the parties, grounds of settlement etc. These statements must be supplemented by evidence, documents or visual representation. The copy of the same statement must be sent to the other party. Conciliator can also request for additional documents whenever he needs them. According to Section 67(3) and 69(1), the conciliator can set up meetings for the parties or he can meet parties together or separately. The place of meeting can be decided by parties or conciliators. He can also communicate with the parties orally or in written form. He must also consider the party’s expressed wishes like quick settlement of the case which also depends upon the circumstances of the case.
Advantages and disadvantages of Conciliation
- The conciliation procedure is of private nature. The documents, evidences or any other information which are used during the process are Confidential.
- One of the most important advantages is that they are Informal process and contains Simple procedures which can be easily followed by the general people.
- The process depends upon the circumstances of the case. In these processes the need of the parties comes first like quick settlement of their cases so there is no chance for delay.
- The selection of the conciliators depends upon the parties. The parties can choose conciliator on the basis of their availability, experience in particular field, previous track records of the cases, knowledge in subject area.
- The conciliation is cheap as compared to litigation. They are cost effective and most opted process for resolving disputes. It purely depends upon the nature of the dispute but is widely acceptable.
- Conciliator is not a legally qualified person for resolving disputes. His decision is not binding upon the parties.
- As the procedure of conciliation is informal and simple there is high possibility of delivering injustice.
- Miscommunication of information: The role of the conciliator to settle up the case by giving information of one party to another and vice versa. The process of sending and receiving information sometimes leads to mixed and incorrect information. So, by these processes one can easily interpret the information given.
Mediation is one of the alternative dispute resolutions which are voluntary and informal process for resolution of disputes. Mediation is a process which is under the control of the parties. The mediator acts as a middle person who helps to come on a negotiated common point of their dispute. They are trained professionals or sometimes attorneys who assist the parties in dispute to meet at a common place where they can discuss their issues and can try to negotiate to reach at a common output. A mediator uses special kind of conversation and communication to resolve the parties dispute.
The parties can appoint the mediators themselves with mutual consent or the court may appoint the arbitrators in pending litigation. In Mediation, the parties are the decision makers. Mediators don’t decide what is right or wrong or what is fair or unfair. Mediator can’t impose his opinion upon the parties but he can suggest and help the parties to reach a mutual accepted agreement. Mediators may hold joint meetings or can meet with the disputed parties together or separately and can suggest some possible solutions, provide options to compromise, or provide advice and guidance but they cannot impose their opinion or try to solve the dispute forcefully. In mediation, both parties are responsible for reaching the outcome. The role of the parties in mediation is not to convince the mediator but to come up with a common solution which is acceptable by both the parties.
Mediation is an informal method of settling disputes, while it consists of basic rules or procedures. The decision of the mediation is non-binding upon the parties. If the disputed parties have agreed for the process of mediation then it is not binding upon them to agree upon the proposed opinion of the Mediator. The mediator can suggest, give opinions and can tell what to do or what not but he can’t force the parties to attend the mediation if they are not interested to continue.
Mediation can be divided into two categories which is commonly followed in India:
Court referred mediation
The court may refer the pending case to a mediator for mediation if they think there is possibility for the settlement of the case. The act of referring cases is given in Section 89 of the civil procedure code, 1908. These kinds of mediation are used in matters like divorce cases or cases which deals under Negotiable Instrument Act, 1881.
In this kind of mediation, the professional and trained person works as Mediator. The general public, government authorities, personnel from corporate sector or anyone from court can approach them for settling their dispute through mediation.
Mediation in India
Mediation is one of the ancient methods of resolving disputes between the parties.Various forms of Mediation among businessmen gained recognition during Pre-British rule in India. The Mahajans were respected, impartial and wise businessmen who resolved disputes between merchants through mediation. The informal process practiced in India’s western province of Gujarat was a combination of Mediation and Arbitration, now known as Med-Arb in the Western world. Despite of getting widespread acceptance in the business world, arbitration had no legal sanction.
The East India Company gained control from England and divided Indian rulers and converted their commercial purpose in political aggression. By 1753, Britishers established their colonies and British-style courts came into existence in India. By 1775, Britishers ignored the local indigenous processes for settling disputes and set up courts based on British laws of that period. However, there was an underground dispute going on between British values which gives clear decision on cases and Indian values which promote the parties to work with their differences and end it with some kind of settlement. British courts slowly became recognized for their integrity and by gaining people’s confidence. Even after the Independence of India in 1947, the Indian judiciary has been declared as Nation’s Pride. Commerce, trade and industry began to expand rapidly in the 21st century the British system quickly dispensed justice while maintaining respect and honour. In Independence, mediation has also played an important role in awareness of fundamental and individual rights, Government’s participation in the growth of trade, commerce and industry of the nation, establishment of Parliament and State Assemblies, Government Corporation, Financial Participation in institutions, fast growing international commerce and public sector business.
The explosion in litigation resulted from the increase of civil litigation, Business opportunities beyond local borders, increase in population, creation of new acts, new rights and measures and increase dependence on sole Judicial Forum of Courts.. Due to lack of facilities there was a challenge to handle the overload of cases efficiently and effectively by the judicial forum. The concept of Arbitration got legislative recognition for the first time in India through Industrial Disputes Act, 1947. Almost all democratic countries of the world have faced similar problems regarding access to justice. The United States faced the most major changes in their law reform in 30 years and the same was being followed in Australia. United Kingdom has also adopted alternative dispute resolution as part of its legal system. European Union also favoured the arbitration for the settling of commercial disputes between member states.
Differences between Arbitration and Mediation
|Meaning||Arbitration is like a court procedure because the parties submit evidence similar to a trial where the third party hear the entire situation and give his decision which is binding upon the parties.||Mediation refers to a process of settling disputes by independent and impartial third party who assists the parties to reach a common outcome.|
|Procedure||It is a formal procedure like court proceedings.||It is an informal procedure.|
|Third party||Third party is termed as arbitrator.||The third party is termed as mediator.|
|Number of third party||One arbitrator is known as sole arbitrator and there can be more than one arbitrator.||One mediator.|
|Nature of award||They are binding upon both the parties.||They are non binding in nature.|
|Control over outcome||The outcome of the arbitration depends upon the evidence, documents etc the decision depends upon the arbitrators.||The outcome of the mediation depends upon the parties.|
|Decision||During arbitration, both parties are given the opportunity to present their case to the arbitrator. The arbitrator does not pass any decision, but only disposes with the approval of the parties.||Arbitrators do not issue orders, find fault, or make determinations. Instead, help the parties with communication, obtain relevant information and develop alternatives.|
Difference between Mediation and Conciliation
|Meaning||Conciliation is an alternative dispute resolution method in which an expert is appointed to resolve a dispute by convincing the parties to agree upon an agreement.||Mediation refers to a process of settling disputes by independent and impartial third party who assists the parties to reach a common outcome.|
|Regulation||By The Civil Procedure Code, 1908.||Arbitration and Conciliation Act, 1996.|
|Number of Third party||One or more conciliator.||One mediator.|
|Confidentiality||In Conciliation Confidentiality is determined by the law.||In mediation confidentiality depends upon thrust, and it is advised for all parties to sign a Confidentiality Clause for extra measure.|
|Nature of third party||In conciliation the conciliator plays a more active role.||In mediation, the mediator should be impartial and objective to the parties’ dispute.|
|Third party||In Conciliation, the conciliator also plays the role of evaluation and intervention for settling the dispute.||In Mediation, the mediator does not give any judgement.|
Difference between Arbitration and Conciliation
|Meaning||Arbitration is like a court procedure because the parties submit evidence similar to a trial where the third party hear the entire situation and give his decision which is binding upon the parties.||Conciliation is an alternative dispute resolution method in which an expert is appointed to resolve a dispute by convincing the parties to agree upon an agreement.|
|Enforceability of decision||That decision made by the arbitrator is binding in the same way as a court decision.||However, a conciliator has no right to enforce his decisions.|
|Nature of process||Arbitration is a formal process and follows similar procedures as court proceedings where witnesses can be called and evidence can be presented in respective cases.||It is an informal process and usually involves a discussion on table.|
|Prior agreement||Prior agreement is required.||No need of prior agreement.|
|Availability||Available for existing and future dispute.||Available for only existing dispute.|
|Outcome||Arbitral award is final and binding upon parties.||Conciliation does not always ensure that a mutually agreed result will arise between the parties.|
The procedures and techniques discussed above are the most commonly used methods of ADR. However, there are countless various ADR methods, many of which modify or combine the above methods. With each type of ADR, the objective is to resolve the dispute by method of round table discussion . ADR is the most effective process which lessens the burden of courts. ADR promotes harmonious relationship among parties. The settlement of disputes through ADRs is so effective and globally accepted that courts have recognized some of them like mediation more often. This avoids procedure of litigation and the award for fair and impartial settlement of doubtful issues of an individual on legal and ethical basis which is based upon ground reality.
This is what distinguishes ADR methods from general litigation. There can be only one winning party after a court trial, while all parties can be treated as winner after conciliation, mediation or negotiation, as there is no conflict between them and they go through the settlement procedure.
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