Judiciary is one of the best and oldest judicial system but now it becoming
incapable to handle all the pending cases. To deal with this problem, the
judicial system introduced a new process which is called the Alternative Dispute
Resolution to solve cases as soon as possible. Alternative Dispute Resolution
solves cases in an efficient and peaceful manner and the result of the dispute
is mutually accepted by both the parties.
ADR is a dispute settlement mechanism which resolves all types of disputes such
as civil, commercial, family and divorce, industrial, housing, and etc. ADR in
its process takes help of a neutral third party (ex: arbitrator, mediator) who
helps both individuals and groups to communicate with each other and resolves
their dispute in an efficient manner and maintain social order which ultimately
helps them to minimizes hostility.
One of the most important aspects for which parties may prefer alternative
dispute mechanism over litigation because it allows party to understand each
other's position and the actual reason for arising of the conflict and also
gives opportunity to adopt more innovative way of solving disputes which may not
be accepted in the court of law.
Acts which describe about ADR are the Arbitration and Conciliation Act, 199 and
Legal Service Authority Act, 1987. Articles 14 and 21 of the Constitution of
India also describes about ADR which provides with equality before law, right to
life and personal liberty of every citizen.
The main motive of this dispute settlement mechanism is to accomplish equal
justice and free legal aid which is provided under Article 39-A of the
Constitution of India relating to Directive Principle of State Policy (DPSP).
Under Section 89 of the Civil Procedure Code of India, 1908, it states that if
the court satisfies with the situation and elements of the case then the court
can ask the parties to settle the dispute outside the court and refers the case
for: Arbitration, Conciliation, Mediation or Lok Adalat.
ADR And Its Different Methods
To solve dispute quickly and efficiently, ADR adopted different methods which
will help the party to resolve their dispute in a peaceful manner outside of the
court with the help of a neutral third party.
Here are the most common and used ADR methods:
- Arbitration and Conciliation
- Early non-binding neutral evaluation
- Settlement Conferences
Arbitration is one of the most used methods all over the world for dispute
settlement includes under ADR. Arbitration is used in the dispute settlement
mechanism when the conflicting parties mutually agree to accept the decision of
the neutral third person and the neutral third person is known as the Arbitrator
who carefully listens arguments from both parties, considers all evidence then
decides the matter which will help both the parties to resolve their conflict.
Generally, the decision of the arbitrator is final and binding and there is no
appeal but in exceptional situation, there are need for judicial intervention,
if the parties will not satisfy with the decision of the arbitrators, then they
can go to pursue the trial of the court. According to the Arbitration and
Conciliation Act, 1196 under section 2, Arbitration means any arbitration
whether or not administered by permanent arbitral institution.
In the Arbitration and Conciliation Act, 1996 there are some important terms
mentioned. They are arbitration, arbitration agreement, arbitral reward and
arbitral tribunal which is mentioned under sec 2(1)(a) to sec 2(1)(d) in the
According to Sec 7(1), arbitration agreement means an agreement by the parties
to submit to arbitration all or certain disputes which have arisen or which may
arise between them in respect of a mentioned legal relationship, whether it is
contractual or not.
Arbitral award is the final decision and it is granted by the arbitrator and it
includes interim awards. Arbitral award means an arbitration hearing decision
granted by the neutral third party in arbitral tribunal and it is treated
equally with a judgment of a court.
Arbitral tribunal refers to a sole arbitrator or a panel or group of
Arbitration Or Litigation: The Better Approach
Litigation is a very formal process and it must give respect and obey the rules
and procedures made in the court of law. Litigation is a time consuming and
complex process as it is necessary to follow all the rules mentioned in CPR rule
Generally, parties prefer to go for arbitration instead of litigation as it is
less time consuming, expensive, formal and flexible over the process of
litigation. Arbitration can also deliver better quality or efficient judgement
which is mutually accepted and benefited for both the parties than any judgement
of a civil court because all the courts in India are already overloaded with a
huge number of pending cases.
One of the most positive aspects of perusing arbitration is that it gives surety
of privacy and confidentiality in the matter of the conflict and in certain
situations it also does not reveal the names of parties involved in a dispute.
Arbitration allows the conflicting parties to customise and improvise the rules,
regulations and procedures relating to the specific conflict which is not
possible in case of litigation.
Arbitration Or Mediation: The Better Approach
In case of arbitration, the arbitrator passed the final order which is binding
on both the parties, but in case of mediation, the neutral third party
(Mediator) only assists the parties to reach to an agreement and the order
passed by the mediator is not final and binding on the parties. Mediation
process is more informal than the process of arbitration.
Limitations Of Arbitration
Like any other process in dispute settlement mechanism, arbitration has also its
drawbacks. The main limitation of arbitration is that, there is no appeal after
the final grant by the arbitrator. So even in certain cases one of the parties
think that the arbitral award is not justified and it is biased in nature, in
those situations also they cannot appeal (there are only certain situations when
the arbitral award can set aside).
In case of litigation, the evidence which brought before the court are strictly
observed that whether the evidences are admissible or not in the court of law.
But in arbitration cases, illegally required evidence admission is a significant
problem due to absence of proper evidences rule for arbitration and there is a
lack of cross examination and consistency also.
Litigation must follow all the rules and regulations but in case of arbitration
it is not that much of necessary to follow all the rules and this creates lack
of transparency and consistency in the decision. Due to this may be the decision
which will be made by the arbitrator will be biased in nature and cause damages
to one party.
Salem Advocate Bar Association V. Union Of India
Section 89 of CPC, 1908 describes about when and how a court can refer a case to
ADR. This section says that when the court thinks that there exists an element
of settlement between the parties, in this situation the court can make the
terms of the settlement and give that to the parties for their comment and after
receiving the comment the court can create the possible settlement or refer the
case to follow the methods of ADR (arbitration, mediation, conciliation, Lok
In this case the court gave instruction to make an expert committee of the
institution to design the manner in which Section 89 and other provisions
introduced in CPC have to be brought into operation. The court also gave
instruction to design a model case management formula along with all the rules
and regulations, which should be followed while referring a case to ADR as
mentioned under Section 89 of The Code of Civil Procedure, 1908.
ADR Options (Involves Both Arbitration And Mediation)
MED-ARB And ARB-MED
In the process of med-arb and arb-med, it both includes mediation and
arbitration. In case of med-arb, the conflicting parties will first go for
mediation and then if they don't receive a satisfactory outcome from pursuing
mediation, then they can go for a binding result in arbitration. The process of
Med-Arb has evolved in the United States and it deal with disputes like labour
disputes, international disputes and corporate disputes.
In case of Arb-Med, the parties in order to solve their dispute first approach
the method of arbitration which is non-binding in nature, then they can go for
mediation. But if they will not be satisfied with the outcome of the mediation,
then they can accept the arbitral award grated by the arbitrator which is
binding upon the parties. Both the process of Med-Arb and Arb-Med are flexible
and efficient form of dispute settlement mechanism.
MEDALOA refers to 'mediation and last offers arbitration'. It is a very useful
settlement process. When the outcome of the mediation process is not
satisfactory, in those situations the mediator listens to each party's last
offer and then the mediator made a final decision which is the most efficient
one for both of the parties and it should be accepted by both of the parties as
the final settlement.
From the above findings of comparison among litigation, arbitration and
mediation, we here concluded that, arbitration is the best method to approach in
most of the cases in order to solve cases more quickly and efficiently and in
order to clear the backlog of cases in the court of law.
- Arbitration and Conciliation Act 1996
- Code of Civil Procedure 1908
- Salem Advocates Bar Association v. Union of India  AIR 189 (SC)
- Arbitration and Conciliation Act 1996, s 2(1)(a)
- Arbitration and Conciliation Act 1996, s 7(1)
- Arbitration and Conciliation Act 1996, s 2(1)(c)
- Arbitration and Conciliation Act 1996, s 2(1)(d)
- Salem Advocates Bar Association v. Union of India  AIR 189 (SC)