In this blog post, Arunava Chakraborty, a student at Durgapur Institute of Legal Studies and pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, describes the best ways to record an out of court settlement to avoid future trouble.

Out-of-Court-Settlement

An out-of-court settlement occurs when the two parties make an agreement on any claim without having a judge come to a decision in the case. Generally, an out-of-court settlement allows one party to pay a sum of money to the other and in return the other party will close their lawsuit. Mainly, a settlement is a lawfully binding agreement which ends the case exclusive of going to court. The best ways to record an out of court settlement is to enter into an agreement that is binding on both parties detailing the terms of settlement. This agreement must be carefully drafted.

It is also possible to do an out of court settlement even when a court case is going on.

However, the most common way to reach a solution in a dispute without having to go to court, which in India is expensive and can take decades to come to a conclusion, is “Alternative Dispute Resolution” (ADR).

• Alternative Dispute Resolution (ADR) mainly refers to dispute resolution outside of the courtroom which mainly includes arbitration, mediation or mini-trials. ADR techniques can be applied in some categories of disputes, especially, civil, commercial, industrial and family disputes.
• Alternative Dispute Resolution is a term used to express several different modes of resolving lawful disputes. It is practiced by the business world with common men because it is impossible for many people to file lawsuits and get appropriate justice on time. To resolve this problem of unsettled justice, ADR method has been developed in answer to thereof.
• Alternative Dispute Resolution is generally less official, less expensive and less time-consuming than a usual trial. It provides people additional opportunity to settle on when and how their dispute will be determined. The key reasons that the parties may prefer ADR procedures are often two-way and let the parties to recognize each other’s positions.
• It also allows the parties to come out with more innovative solutions that a court may not be legally permitted to enforce. Using Alternative Dispute Resolution (ADR) method to resolve disputes can save time, money, provide more control over the case and on the outcome.

Suggestive Read: Concept of ADR in present legal system

Types Of Alternative Dispute Resolution

The most common types of ADRs are –

1.  Arbitration
2.  Conciliation
3.  Mediation
4.  Neutral Evaluation
5.   Settlement Conferences

• ARBITRATION

Halsbury’s Laws of England has defined arbitration as “a process used by agreement of the parties to resolve disputes. In arbitration, disputes are resolved with binding effect by a person or persons acting in a judicial manner in private rather than by a national court of law that would have jurisdiction but for the agreement of the parties to exclude it.”

Arbitration is a form of alternative dispute resolution that provides a final and binding outcome to litigation which does not require recourse to the Courts. It is a consensual process in the sense that it will only apply if the parties agree it should.

Generally regarded as an alternative to court litigation, the existence of a valid agreement to arbitrate should mean that state courts refuse to hear disputes falling within the scope of that agreement.

In arbitration, the parties submit a dispute to an appointed decision-maker (arbitrator), or panel of arbitrators (the tribunal). This is typically done by providing for arbitration in the contract (the arbitration agreement).

The agreement should also cover the number of arbitrators, the location (also known as the seat) of the arbitration, and the procedural rules that will govern the arbitration. The tribunal will generally give its decision (the award) following a hearing during which each party will have the opportunity to present its position.

If appropriate, arbitrations can be conducted on paper only, for example, where the sums or issues in dispute do not justify a hearing. Generally, the tribunal will decide the dispute in accordance with the law governing the relevant contract.

The General Principles Were –

1. The object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense.
2. The parties should be free to have the same opinion on how their disputes are resolved, subject only to such safeguard as are compulsory for the public interest and
3. Court intervention should be restricted.

Further Reads:

• Arbitration on Matrimonial & family matters.
• Arbitration in IPR Disputes.
• Advantages of Arbitration over Litigation in IPR Disputes

• CONCILIATION

• A conciliation is the form of alternative dispute resolution process where the parties to a dispute make use of a conciliator, who meets with the parties individually in order to determine their differences. They do this by lowering tensions, improving interactions, interpreting issues, providing & exploring possible solutions for the settlement.

• Conciliation is a voluntary process where the parties concerned are open to having the same opinion and attempt to the resolution of the dispute by conciliation.

• It is flexible, allowing parties to define the time, constitution and content of the conciliation procedures. These proceedings are not often public. It involves discussions between the parties and the conciliator with an intend to explore sustainable resolutions by a look into the existing issues concerned in the dispute and creating options for an arrangement that are suitable for all the parties.The conciliator does not make a decision for the parties but tries to sustain them in generating options in order to find a resolution that is well-suited to both parties. It is risk-free and not obligatory on the parties till they agree & sign the agreement.

• Formerly a resolution is reached among the disputing parties prior to a conciliator, the agreement had the outcome of an arbitration award and is lawfully acceptable in any court in the country.

Additional Read:

• Conciliation as a process to resolve family disputes.

• MEDIATION

• Mediation differs from arbitration in that the impartial third party (the mediator) does not impose a resolution. The objective of mediation is to help the parties determine their own dispute so, a mediator’s functions can differ depending on the requirements of the parties and their attorneys, the past record of the dispute and the individuality and skills of the mediator.

• The mediator does not make a decision on the dispute but helps the parties be in touch so that they can try to resolve the dispute themselves. Mediation leaves organized outcome with the parties.

• Mediation may be mainly helpful when parties have an association they want to defend like – if family members or business partners have an argument, mediation may be the ADR method to use.

• Mediation is also effectual when emotions are getting in the means of resolution. An efficient mediator can hear the parties out and help them to be in touch or communicate with each other in an effective way. Mediation may not be effectual if one of the parties is reluctant to help or compromise and if one of the parties has a significant advantage in control over the other.

Additional Read:

• Why is Mediation important in Divorce cases?
• Mediation Essentials.

• NEUTRAL EVALUATION

In neutral evaluation, both the parties get an opportunity to present the case to a neutral person (an evaluator). The evaluator hears shortened arguments, reviews the strength and weakness of each party and offers an assessment of possible court outcomes in an attempt to promote settlement. The evaluator is skilled in the subject matter of the dispute.

Even though the evaluator’s view is not binding, the parties usually use it as a source for trying to discuss a resolution of the dispute. The evaluator may also give case planning regulation and settlement support with the consent of the parties. The neutral evaluation may be most suitable in cases where there are technical issues that need special skill to resolve the issue in the case is the amount of compensation.

SETTLEMENT CONFERENCES

It may be either compulsory or voluntary. In settlement conferences, the parties, and their attorneys meet up with a judge (or a neutral person), called a settlement officer, to talk about the possible resolution of their dispute. The settlement officer does not make a resolution in the case although, assists the parties in evaluating the strengths and weaknesses of the case and in negotiating a resolution. These are appropriate in any case where a resolution is an option.

India being a developing nation is going through major economic reforms within the frame of the law, where for the resolution of disputes and to decrease the burden on the courts, alternative dispute resolution (ADR) is introduced. Indian courts experience a serious accumulation of cases which is mostly due to less number of judges and the lack of infrastructure which is incapable of handling the caseload.

Section 89 of the Code of Civil Procedure, which gives importance to mediation, conciliation, and arbitration, makes it compulsory on the part of the Court to refer the matter for resolution.

It has become a global phenomenon to resolve commercial disputes through arbitration. Alternative Dispute Resolution is comparatively low-cost in comparison with the usual legal procedure. It helps litigants who are incapable of meeting the expenses involved in the ordinary process of dispute resolution through Courts.

The government has to play a pro-active role in this direction. Overall, in order to make Alternative Dispute Reform mechanisms more successful then, there must be the restricted area of application and wide in the area of its procedure.

According to you, what’s the best way to do out of court settlement? Comment Below. And don’t forget to Share.