Alternate Dispute Redressal Mechanism

-Lok Adalats, Conciliation, Arbitration etc.

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Presented By Group 9: Agneeshwar Vyas, Bikash Malick, Damcho Lham, Jasleen Kaur, Jayant Singh, Mira Sethi, Rahul Patel, Rajat Singh

Outline

• Introduction-Historical Perspective & Legislations

• ADR or Conventional Judicial System?

• Modes of ADR

• Arbitration & Conciliation Act (1996)

• Arbitral Tribunals- Scope & mechanism

• Lok Adalats- Scope & mechanism

• Limitations of ADR

• Role of ADR (Case Studies)

• Summary

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Introduction Alternate Dispute Redressal-Historical Perspective & Legislations

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Connecting the dots…….

WHAT’S COMMON

• Yashu – “Taarekh Pe Taareekh”

Jayaprakash Narayan- Do you think Justice Delivery System has worked????

• Ravali- Informal System has worked more than the Formal System of Justice Delivery.

What did they mention…

Justice Delivery Scenario in India…

Judicial System is severely stressed

• Too formal

• Expensive

• Full of delays and

• Adversarial

Arbitration: A way forward...

• “The notion — that ordinary people want black-robed judges, well-dressed lawyers, and

fine paneled courtrooms as the setting to resolve their disputes, is not correct. People

with legal problems like people with pain, want relief and they want it as quickly and

inexpensively as possible.”

-Justice Warren Burger,

Chief Justice of the American Supreme Court

• This observation with greater force applies in the Indian context.

“Arbitrate, not Litigate”

• Different Modes of ADR available.

• Minimising the role of courts to the extent

possible in settlement of disputes.

• Creative Problem Solving.

• ‘Legal Process’ outside the Court for resolution of dispute by neutral person.

Scope of ADR Methods

• Family Disputes

• Personal Injuries

• Employment Disputes

• Commercial Disputes

• Consumer Disputes

• Property Disputes

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Historical Perspective: Ancient & Medieval India

• Village panchayat flourished in India not due to

anarchy as was but, because the central government

was itself refusing to entertain any suit at the first

instance and were deliberately referring all of them

back to the village Panchayat.

Sir Henery Maine (Jurist & Historian)

• Intervention of several informal bodies before the king came to adjudicate on disputes.

– Kulas (family or clan assemblies),

– Srenis (guilds of men following the same occupation)

– Parishads (assemblies of learned men who knew law

Historical Perspective and Legislations

Bengal Regulation Act 1772

Indian Arbitration Act-1899.

CPC-1908

Arbitration Act 1940

Dec 3 1993, New Delhi Conference

Arbitration and Conciliation Act

1996 Legal Services Authorities Act, 1987

CPC-1908, 1999 Amdt -Sec89

ADR or Conventional Judicial System?

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Advantages of ADR over Courts…

• Flexibility

• Speed

• Less Expensive

• Confidentiality • Party Autonomy • Relationship

Some contrasting features…

ADR COURTS

Lawyer

Legal Precedent

Adversarial

Reluctant Opponent

Modes of ADR Arbitration, Conciliation, Mediation, Judicial Settlement through Lok Adalats

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Modes of ADR

• Arbitration

• Conciliation

• Judicial settlement through Lok Adalat

• Mediation

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Arbitration and Conciliation Act, 1996

Recourse to ADR process u/s 89 CPC is mandatory. If

case is unsuited for reference to ADR, court

has to record reasons for not resorting to it

Order 10 Rule 1-A: Direction of the Court to opt for any one mode of

alternative dispute resolution

Order 10 Rule 1-B: Appearance before the conciliatory forum or

authority

Order 10 Rule 1-C: Appearance before the

Court consequent to the failure of efforts of

conciliation

Sec. 89 of the Civil Procedure Code provides for Settlement of disputes outside the court through

Legal Services Authority Act, 1987

Court shall effect a compromise b/w the parties

Types of ADR Procedures

Adjudicatory

Adjudication: Neutral party imposes decision that is binding

Adversarial: Win-Lose outcome

Arbitration

Non-Adjudicatory

Resolution: Neutral party suggests settlement options

Non-Adversarial: Win-Win outcome

Conciliation, Mediation, Lok Adalat

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Arbitration

• Parties in dispute refer the matter to one or more arbitrators, by whose

decision they agree to be bound

• A valid arbitration agreement must exist between the parties prior to the

emergence of dispute

• Advantage: Fast, flexible, confidential, choice of arbitrator with expertise,

Limited rights of review and appeal of arbitration awards

• Disadvantage: parties waive rights to access courts if arbitration in

contracts is mandatory, pressure from powerful parties, high fees charged

by arbitrators, Limited avenues of appeal to overturn erroneous decision

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Conciliation

• Conciliators resolve disputes by providing technical assistance, improving communication between

parties and proposing possible solutions taking into account parties’ position and interests

• Resolution is non-binding till both disputing parties agree to sign.

• Disputes conducive for conciliation: Commercial, financial, family, insurance, labor, consumer protection,

• Conciliator is not bound by rules of procedure and evidence

• ACA, 1996 Sec 67(1)-proposal for settlement need not be accompanied by statement of reasons

• ACA, 1996 Sec 30, 64(1), 73(1): pro-active, interventionist role of conciliator in formulating terms of

settlement

• Cannot produce as evidence in arbitral proceedings views expressed, admissions or proposals made in

conciliatory proceedings. Conciliator cannot be produced as witness in judicial proceedings

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Mediation

• Voluntary, informal, party-centered, structured negotiation process

• Mediator is only a facilitator and cannot propose solution

• Parties control the outcome

• Cases are conducive for mediation if

• There exist communication problem, emotional barriers

between parties

• Resolution is important than vindicating legal principles

• Parties have incentive to save time, cost, drain on productivity

due to litigation

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Sum

mar

y Feature Arbitration Conciliation Mediation

Neutral Third Party Arbitral Tribunal/Arbitrator (Adjudicator)

Conciliator (Interventionist)

Mediator (Facilitator)

Prior Agreement Required Voluntary Voluntary

Process Adversarial (Adjudication)

Non-Adversarial (Resolution)

Non-Adversarial (Negotiation/collaborative)

Award/Decision Binding Non-Binding Non-Binding

Rights of Review/Appeal Limited - -

Degree of Formality

Role of Third Party

Role of Parties

Cost

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Arbitration & Conciliation Act,1996 Overview of Important Sections of the Act

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Introduction

• The Arbitration & Conciliation Bill was introduced in the Parliament in 1995 and

was passed in 1996 as an Act

• Earlier to this, the law on arbitration was contained in three enactments:

1. The Arbitration (Protection & Convention ) Act 1937

2. The Arbitration Act 1940

3. Foreign Awards Act 1961

• The present act has 86 sections & 3 schedules

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Background of the Act • The United Nations Commission on International Trade Law

(UNCITRAL) adopted a model law on international commercial

arbitration, 1985

• The General Assembly of United Nations advised all the member

countries to adopt the law

• The law commission in India had been asking for change in the

existing laws

• It is in the above context that the new act was passed by the

parliament

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Objectives of the Arbitration & Conciliation Act, 1996

• To provide for fair and neutral settlement

• To minimize supervisory role of court

• To cover international commercial arbitration

• To enforce every final arbitral award in same manner as per the decree of the

court

• To permit arbitral tribunal to use conciliation during arbitral proceeding

• To define work area of arbitrator and conciliator

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Important Sections of the Act w.r.t. Arbitration

• Section 2 provides that Arbitral Award includes an interim award.

Arbitral tribunal means a sole arbitrator

• Section 3 provides that receipt of any communication means a proof

of delivery to the party

• Section 7 provides that Arbitration Agreement should be in writing

and signed by both the parties

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Arbitration Agreement

• It is an agreement between parties (A & B) in which dispute is to be

submitted

• There should be legal relation b/w parties (whether contractual/not)

• Both the parties agree to go to arbitrator

• Features of this agreement:

a. It must include of all the essentials of a valid contract

b. It should be in writing

c. It should contain either present/future dispute

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Important Sections of the Act w.r.t. Arbitrator

• Section 8 provides that judicial authority possess power to refer parties to

arbitrator (Example)

• Section 10 provides that number of arbitrators (Arbitral Tribunal) will be decided

by the parties

o If parties don’t concur in the appointment then court will make the appointment

of the arbitrator

o The appointment has to been made within 30 days from the date of request

proposed by the other party.

o If the number of arbitrators can’t be decided then the arbitral tribunal shall consist

of a single arbitrator. In case of more than one arbitrator there must be a

chairman of the tribunal.

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AKASH BIKASH

File Suit

Remedy

(section 8)

Write An

Application With a

Certified copy of Arbitration

Agreement

ARBITRATOR

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COURT

• Section 14 provides for FAILURE OR IMPOSSIBILITY TO ACT: a person will cease to be an

arbitrator, if

• he fails to act without undue delay

• he withdraws from his office or the parties agree to the termination of his mandate

• Section 19 provides for DETERMINATION OF RULES AND PROCEDURE: the parties are

free to agree all the procedure to be followed by the arbitral tribunal

• Section 20 provides for PLACE OF ARBITRATION: the parties have to agreed on the

place of arbitration. If the parties can’t decide then arbitral tribunal will decide

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Important Sections of the Act w.r.t. Arbitrator

Important Sections of the Act w.r.t. Arbitration

• Section 21 provides for the COMMENCEMENT OF ARBITRATION PROCESS: the

arbitration proceedings in respect of any dispute commence on the date on which a

request for arbitration is received by the opposite party

• Section 23 provides for STATEMENT OF CLAIM: the claimant shall state with the fact

supporting his claim within the period of time agreed upon by the parties or by the

arbitrator

• Section 25 provides for DEFAULT OF A PARTY: the arbitral tribunal shall terminate

the proceeding if the claimant fails to lodge his claim as prescribe in section 23

above

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Summary

Keeping in view the large number of pending cases in the courts, this Act has

become the need of hour to solve the small disputes between the two parties. This

Act not only provides the mechanism to solve the dispute within the boundary of

the country but also in solving disputes at international level.

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Arbitral Tribunals Scope & Mechanism

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Framework

• In the interests of public policy, the Arbitration Act contains a number of mandatory

provisions, including in relation to:

• Limitation periods

• The form of the arbitration agreement

• An arbitrator being ineligible for appointment

• The court being required to refer parties to arbitration if the dispute is subject to an

arbitration agreement

• The court's power to terminate the arbitrator's mandate

• The grounds on which an arbitral award can be challenged or appealed

What legal fee structures can be used? Are fees fixed by law?

In an institutional arbitration, the fee is prescribed by the institution.

However, for domestic arbitration with a seat in India, recent amendments

have given the powers to the states to prescribe fees.

Limitation Period

The same limitation period that applies to a civil suit also applies

to an arbitration. Therefore, the limitation period under the

Limitation Act for a civil suit is also applied by arbitrators. The

period of limitation varies from one to three years, depending on

the nature of the dispute.

Arbitrator’s Independence and Impartiality

• Arbitrators must give a statement that they are independent and impartial on appointment. If

an arbitrator is not independent or impartial, an objection in this regard must to be raised

before the arbitral tribunal itself.

• Two schedules (Schedule V and VII) have recently been added to the Arbitration Act(2015),

which provide the grounds by which an arbitrator can be considered ineligible or an

arbitrators independence can be reasonably questioned. This is a mandatory non

obstante clause. It is not entirely cleared how these amendments will be put into practice

but at present it appears that such a challenge will have to be made before the Arbitral

Panel itself (under the existing judgments). However, it is possible that the courts may also

exercise power in this regard.

Appointment of Arbitrators

Parties normally mention in their arbitration clause whether disputes will be

adjudicated by a sole arbitrator or by a panel consisting of an odd number of

arbitrators. The default provision is for a sole arbitrator. If the parties fail to agree on

the appointment of arbitrators, they have the option under section 11 of the

Arbitration Act to have the arbitrator(s) appointed by the court.

Removal of Arbitrators

• Parties can challenge the appointment of an arbitrator under sections 12 and 13 of the

Arbitration Act, if a justifiable doubt arises as to the arbitrator's independence or

impartiality or the arbitrator(s) does not possess the necessary qualification as agreed by

the parties. Certain categories of Arbitrators have been made ineligible under the

amended provisions of the Arbitration Act. In addition, an arbitrator can be removed

under section 14 if the:

• Arbitrator(s) is unable to perform his functions or for other reasons.

• Arbitrator fails to act without undue delay.

• Arbitrator withdraws from his office.

• Parties agree to terminate the arbitrator's mandate.

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Breach of Agreement

Court proceedings in breach of an arbitration agreement

If one of the parties to an arbitration agreement initiates court proceedings in

contravention of the arbitration clause, the other party can and should object to the

proceedings on the ground that there is an arbitration agreement between the

parties. The court must refer the parties to arbitration under section 8 of the

Arbitration Act. However, any objection to such proceedings must be dealt with

before filing the first statement. If the opposite party does not raise any such

objection, the proceedings in the civil court proceed.

Arbitration in breach of a valid jurisdiction clause

If arbitration is invoked where there is either no arbitration clause or where

the dispute is not arbitrable, the other side can make a preliminary objection

to the validity of the arbitration. There can be no arbitration in breach of a

valid jurisdiction clause.

Breach of Agreement (Contd.)

Courts Power to Remove an Arbitrator

If an arbitrator becomes legally or practically unable to perform his function or

withdraws from his office, the court can be approached to decide on the

termination of the mandate of the arbitrator and appointment of another

arbitrator (unless otherwise agreed by the parties). However, the arbitrator's

impartiality and independence must be raised in the first instance before the

arbitrators. If the arbitrators do not accept the submission, this can be a ground for

challenging the award. However, the court can also remove arbitrators if they are

found to be ineligible.

Appeal

Rights of appeal/challenge

Arbitration awards can be challenged in the local courts in India. Parties cannot waive the

right to challenge an award.

Grounds and procedure

The award can be challenged only if:

• A party was under some form of incapacity.

• The arbitration agreement was not valid under the law to which the parties had subjected it

• The party making the application was not given proper notice of the appointment of an

arbitrator or of the arbitral proceedings, or was otherwise unable to present his case.

• The award dealt with a dispute not contemplated by, or not falling within, the terms of the

submission to arbitration.

• The award contained decisions on matters beyond

• the scope of the submission to arbitration.

• The composition of the arbitral tribunal or the arbitral procedure was not in accordance

with the agreement of the parties or, failing such agreement, was not in accordance with

the provisions of the Arbitration Act.

• The subject matter of the dispute was not capable of settlement by arbitration.

• The award was in conflict with the public policy of India.

Appeal (contd.)

Main Arbitration Bodies in India

• Indian Council Of Arbitration

• Delhi International Arbitration Centre

• Construction Industry Arbitration Council

• International Chamber Of Commerce Industry

Challenges

Arbitrations have also become time consuming and expensive and, even

after an arbitral award, one party or the other tends to challenge the award

in court. This is particularly true when the unsuccessful party is a

government entity. In many states, the process of challenging the award

itself takes a long period of time, defeating the purpose of arbitration,

although some courts in India do decide such challenges quickly.

Lok Adalats Scope & Mechanism

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Outline

• Introduction

• Cases suitable for Lok Adalat

• The Need for Lok Adalat

• Constitution of Lok Adalat

• Working of Lok Adalat

• Jurisdiction of Lok Adalat

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Indian Judiciary (post-independence period)

Supreme court

High court

Subordinate courts or Lower courts in District Level

Criminal court Civil court

Village Panchayats

Introduction

• Innovative Indian contribution to the world of jurisprudence

• Based on Gandhian principle

• One of the components of ADR system

• In ancient times the disputes were referred to “Panchayat”

Cases Suitable for Lok Adalat

• Compoundable civil and Criminal and

Revenue Case

• Motor accident compensation claims

cases

• Partition Claims

• Damages Cases

• Matrimonial and family disputes

• Mutation of lands case

• Land Pattas cases

• Bonded Labour cases

• Land acquisition disputes

• Bank’s unpaid loan cases

• Arrears of retirement benefits cases

• Family Court cases

• Cases which are not sub-judice

Lok Adalats have competence to deal with a number of cases like:

The Need for Lok Adalat

As Justice Ramaswamy said: “Resolving disputes through

Lok Adalat not only minimizes litigation expenditure, it

saves valuable time of the parties and their witnesses and

also facilitates inexpensive and prompt remedy

appropriately to the satisfaction of both the parties”

Constitution of Lok Adalat

• Section 19 of the Legal Service Authority Act,1987 provides about the constitution of Lok Adalats.

According to section 19(1), every State Authority, District Authority, Supreme Court, Legal Service

Committee, Taluk Legal Services Committee can constitute Lok Adalats, from time to time or at a such

intervals, as they may deem fit.

• According to Section 19(2), The Lok Adalats will constitute by the merger of the following:

a) Serving or retired judicial officers

b) Other persons who have good knowledge about procedures

• The qualification and experience of the persons participating in the Lok Adalats will be decided

under section 19(3) and 19(4)

Jurisdiction of Lok Adalats

According to section 19(5) of Legal Services Authority Act, 1987, Lok Adalat

can decide case by compromise and settlement. The cases are:

a) Any case pending before or

b) Any matter which is falling within the jurisdiction of, and is not brought

before, any court for which the Lok Adalats are organized.

Working of Lok Adalats

• Section 20 of the Legal Services Authority Act, 1987 provides about the working of Lok

Adalat. According to it:

a) Any party can settle his case by Lok Adalat

b) It will hear the case after the case comes to it

c) If settlement is not reached then the case is returned back to the court

• As per Section 21, if a compromise is reached, an award is made and is binding on the

parties. Award has same effect as of a Civil Court decree.

• No appeal shall lie against award of Lok Adalat

Limitations of ADR

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Limitations of ADR Methods

1. Compatibility in blistering era of disputes

2. Confidentiality

a) The possibility of bias

b) Lack of power to establish legal precedents

3. Limited Judicial Review

4. Unfamiliarity with the procedure and Lack of Awareness

5. Wastage of time/money if case is not resolved

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Role of ADR Examples of some famous cases resolved through ADR

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Some Famous Cases

Ashoka Tubewell vs. Union of India (Supreme Court of India, 2014)

Scherk vs. Alberto Culver Co. (US Supreme Court, 1974)

Summary

• ADR methods such as Arbitration, Conciliation, Mediation, Lok Adalats can be effective

solution to reduce pendency of cases pertaining to civil, commercial, industrial, family,

consumer disputes etc.

• Major Legislations on ADR: Sec 89 Civil Procedure Code, Arbitration & Conciliation Act

1996, Legal Services Authority Act 1987

• ADR procedures have advantage of being cheaper, faster, more flexible & preserving

business and personal relationships

• However there are limitations pertaining to enforceability of awards, judicial review,

domestic policy considerations and lack of awareness which raise questions on the

effectiveness of ADR

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Thank You

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“I realized that the true function of a lawyer was to unite parties…The lesson was so

indelibly burnt into me that a large part of my time during the twenty years of my

practice as a lawyer was occupied in bringing about private compromise of hundreds

of cases. I lost nothing thereby not even money; certainly not my soul.”

- Mahatma Gandhi