Alternative Dispute Resolution: Its need and Importance

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It is a well-known fact that the Indian Judiciary is one of the oldest judicial systems, but it is also known that the Indian Judiciary has become inefficient in settling disputes despite a large number of fast-track courts that have been created. The Indian courts are clogged with thousands of cases and the problem is far from being solved as the cases keep on piling up. The reason is not only the inefficiency of the courts to solve them in a limited time but also the fact that small matters which can be discussed outside the courts are also filed before the courts.

What is Alternative Dispute Resolution Mechanism (ADR)?

ADR is a technique to resolve disputes and disagreements between the transacting parties by arriving at an amendable settlement through negotiations and discussions. ADR is capable of providing other means and methods for solving disputes of all types including civil, commercial, family, etc. The general principle of ADR is that it uses a third party to settle the disputes between the transacting parties. One of the primary reasons’ parties may prefer ADR proceedings is that, unlike adversarial litigation, ADR procedures are often collaborative and allow the parties to understand each other’s position. It aims to maintain peace and cooperation between the transacting parties and prevents hostility among them. The purpose of solving dispute through ADR is to lower the burden upon the courts and provide early access and speedy trial to those cases which are more serious. In India, ADR is established based on Article 14 and Article 21 of the Constitution of India.

The Supreme Court in Salem Advocate Bar Association v. Union of India[1], has ruled that where it appears to the court that there exists an element of a settlement which may be acceptable to the parties, they at the instance of the court shall be made to apply their mind so as to opt for one or the other ADR methods mentioned in section 89 of Code of Civil Procedure,1908.

Origin of Alternative Dispute Resolution in India

In India, there were kulas, and people used to live in joint families with their clans. When the caste system became prevalent people began living in the societies along with the members of their caste. The disputes among the kulas were resolved by the heads of the family and clan. After this came the system of forming trade associations where the head or the President of the association was appointed to resolve the dispute between the transacting parties. 

Pre-Independence era: Drastic changes came in the administration of India during the British era when various legislations were introduced. In 1772, the courts were empowered to refer the disputes to arbitration either at the request of the parties or at the court’s own discretion. In 1859 The Code of Civil Procedure was enacted which dealt with arbitration but in 1882 it was repealed.

The Indian arbitration act, 1899 was enacted in the year 1899 to give effect to alternate dispute mechanism in India. Code of Civil Procedure was again enacted in 1908 and gave wide powers to the court to refer disputes to ADR mechanism. Under the first schedule, order XXXII A, Rule 3 a duty is cast upon the courts that it shall make an endeavor to assist the parties in first instance, in arriving at a settlement in respect of the subject matter of the suit.[2]

Thereafter, in 1937 Geneva Convention was signed and adopted by India and a parallel legislation was introduced in the form of The Arbitration (Protocol and Convention) Act, 1937. In 1940 Indian Arbitration Act, 1899 and section 89 with second schedule of CPC was repealed and replaced by The Arbitration Act,1940.

Post-Independence era: The Arbitration (Protocol and Convention) act,1937 and The Arbitration Act,1940 were presently in force in India for referring disputes to ADR mechanism. In M/S Guru Nanak Foundation v. Rattan Singh & Sons[3], the Supreme Court described the Arbitration Act,1940. It observed, “the way in which the proceedings under the act are conducted and without an exception challenged in courts, has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the act have become highly technical and accompanied by unending prolixity, at every stage providing a legal trap to the unwary”.

In 1996, finally The Arbitration (Protocol and Convention) act, 1937 and The Arbitration act, 1940 was repealed and consolidated in a single piece of legislation, the act was called The Arbitration and Conciliation act, 1996.The act of 1966 was amended twice in 2015 and 2019.

Types of Alternative Dispute Resolution Mechanisms

  1. Arbitration

Arbitration is the process of solving an argument between people by helping them to agree to an acceptable solution. Arbitration means resolving disputes between the parties as early as possible without getting into procedural technicalities which are associated with the functioning of a civil court. In Collins v. Collins[4], the court gave a wide definition to the concept of arbitration. It said, ‘An arbitration is a reference to the decisions of one or more persons either with or without an empire, a particular matter in difference between the parties.

 Section 2(1)(a) of Arbitration and Conciliation Act,1996, defines “Arbitration” as meaning any arbitration matter whether or administered by a permanent arbitral institution.

In State of J&K v. Dev Dutt Pandit[5], the SC observed that arbitration is an important ADR process, which is to be developed and encouraged.

Kinds of Arbitration

  • Ad-hoc arbitration

When a dispute or difference arises between the parties in the course of commercial transaction and the same could not be resolved either through negotiation or mediation, in such cases ad-hoc arbitration may be sought by the conflicting parties. It is not administered by an institution and therefore the parties are required to identify all aspects of arbitration. Ad-hoc proceedings can be faster, cheaper and flexible than an administered proceeding.

  • Institutional Arbitration

When there is a prior agreement between the parties that in case of any differences or conflicts in the future the matter would be resolved through arbitration and it would be referred to the named institution of which one or more of them are members it is known as institutional arbitration.

  • Contractual Arbitration

Due to the growth of commercial activities in the modern times there are frequent differences and disputes between the parties which are required to be settled amicably. Thus, to seek early settlement of differences and disputes without taking recourse to the court of law, the parties involved choose to incorporate an arbitration clause as a part of the agreement to refer their future or existing differences to a named arbitrator to be appointed by a designated authority. This is known as contractual arbitration.

  • Statutory Arbitration

When a law specifies that if a dispute arises in a particular case it has to be referred to arbitration, the arbitration proceedings are called “statutory arbitration”.

  • Fast-track Arbitration

Fast track arbitration is a time bound arbitration, with stricter rules of procedure, which do not allow any laxity for extension of time, and the resultant delays, and the reduced span of time makes it more cost effective.

  • Mediation

Mediation is a process in which an external person who is known as mediator works with the transacting parties to resolve the dispute and differences between them. Mediation is always carried out with an assistance of third party. The mediator has no power to impose his/her decision on the parties.

The village Panchayats and the Nyaya Panchayat are good examples of this.

  • Conciliation

Conciliation is an alternative out-of-court dispute resolution instrument. Conciliation is a voluntary, flexible, confidential, and interest-based process. The parties seek to reach an amicable dispute settlement with the assistance of the conciliator, who acts as a neutral third party. The main difference between conciliation and mediation proceedings is that, at some point during the conciliation, the conciliator will be asked by the parties to provide them with a non-binding settlement proposal. A mediator, by contrast, will in most cases and as a matter of principle, refrain from making such a proposal. Conciliation is a voluntary proceeding, where the parties involved are free to agree and attempt to resolve their dispute by conciliation. The process is flexible, allowing parties to define the time, structure and content of the conciliation proceedings. These proceedings are rarely public. They are interest-based, as the conciliator will when proposing a settlement, not only take into account the parties’ legal positions, but also their; commercial, financial and / or personal interests. Like in mediation proceedings, the ultimate decision to agree on the settlement remains with the parties.

  • Lok Adalat

The establishment of Lok Adalats under the Legal Services Authority Act, 1987 is one of the alternative means of dispute resolution or redressal.

The word “Lok Adalat” means “People Court”. The Lok Adalat is an old form of adjudicating system prevalent in India which is based on Gandhian Principles. Lok Adalat is another alternative to judicial justice. It is a strategy of delivering of delivering informal, cheap and expeditious justice to the common man by way of settling disputes which are pending in courts and those also which have not reached the courts.[6]

Honorable Delhi High court has given a landmark decision highlighting the significance of Lok Adalat movement in the case of Abdul Hasan and National Legal Services Authority v. Delhi Vidyut Board and Others[7]. The court passed the order giving directions for setting up of permanent Lok Adalat.

  • Negotiation

Dictionary meaning of the word Negotiation is discussion aimed at reaching an agreement. Basically, negotiation is a method to settle disputes peacefully by being flexible in various aspects. This method can be applied in every kind of dispute such as technical, legal or political.

Merits of ADR

  • In the case of arbitration, the parties can select what procedural and domestic rules will be applied to their dispute.
  • Attorneys and expert witnesses are very expensive. Litigating a case can easily cost hundreds and thousands of rupees. ADR offers to resolve the case quickly without much delay and incurs less expenses.
  • ADR allows the parties to work together with a neutral arbitrator or mediator so that the dispute can resolved quickly and the transacting parties are satisfied by the conclusion.
  • ADR process can be initiated at any time, whenever disputing party takes recourse to ADR.
  • ADR programs are not rigid.
  • ADR can be used to reduce the gravity of contentious issues between the parties.

Demerits of ADR

  • With the exception of arbitration, alternative dispute resolution processes do not always lead to a resolution. That means you could spend time and money and still end up going for litigation process.
  • Unfamiliarity of process is a factor causing obstruction in ADR.
  • The remedies established or given out to parties cannot be binding to future cases which means that remedy for one cannot be taken as a guiding stone for another.

ADR: Why needed

  1. Amicable settlement of disputes

ADR provides for a friendly settlement of disputes. In business it is a prudent approach to have a competitor not a rival. It is clear that a healthy competition brings improvement and it’s also cost effects cost of service or commodities in every sphere.

  • Speedy disposal of trial

ADR provides for speedy disposal of trials. Unlike litigation process in ADR there is no scope of adjournment or stay order.

  • Economical settlement of disputes

Unlike litigation process where huge expenses are incurred to pay the advocates and other people involved in the trial, in ADR it is not the case and minimum amount of money is required.

  • Time saving management

In ADR the dispute is resolved without following the cumbersome procedure of ordinary litigation that’s why ADR is also known as dispute management.

  • Legal recognition

This system has been recognized in the Indian Statutes. For instance- now the Civil Procedure Code,1908, Order 32-A, Rule 3 contains scope for compromise and the decree evolved from that compromise is not appealable. Notably, section 12 of the Industrial Disputes Act,1947 contemplated provisions for conciliation as pre-requisite for any pressure tactics/collective bargaining.

  • Advent of multinational corporations

A number of multinational corporations are coming to invest and establish their business. These businesses have dynamic approach in their business activities. Therefore, in case of disputes they should be provided with such a mechanism which can resolve their dispute immediately and without delays.

Suggestions for improving mechanisms

  • Courts are authorized to convey directives for the adoption of ADR mechanisms by the parties and for that purpose Court must play important role by way of giving guidance. Power is additionally conferred upon the courts so it can intervene in numerous stages of proceedings. But these goals can’t be achieved unless requisite infrastructure is provided and institutional frame work is put to position.
  • Awareness can be brought by holding seminars, webinars and workshops. ADR achievement programs have to be organized so that the mindset of lawyers, parties in conflict and judges can be changed.
  • Training of ADR practitioners should be held by the universities, colleges and institutes. Training of ADR should be made a part of university curriculum.
  • Judicial officers must be trained to identify the cases which can be solved outside the courts.
  • ADR mechanisms should be made more viable because inflow of cases cannot be stopped as the doors of judiciary are not closed but the outflow can be increased by providing other means of dispute resolution.
  •  Mediation centers can be setup in districts and tehsil areas which will help the citizens to resolve their disputes quickly and without going for litigation process which is a time taking process.
  • Not everyone can afford litigation as it is an expensive process so ADR methods should be taken to panchayat and nyaya-panchayat levels (rural areas).
  • The conclusion arrived at in ADR should be made biding upon the parties which is not the case at present and the parties are allowed to appeal in the court if they wish.


It is a well-known fact that there are plenty of cases pending in Indian courts due to lack of resources including human resources and infrastructure. According to the National Judicial Data Grid, there are about 73 lakh cases pending across the country. Although, various steps have been taken towards the improvement of the system such as speeding up the judicial process, the establishment of new courts and increasing the number of judges, etc. Besides this, in 1999 the union government has amended Section 89 of Civil procedure Code 1908 and mandated the courts to try out the possibilities of resolving the pending disputes through arbitration or mediation or Lok Adalat which is known as ADR system. Although the aforementioned steps have been taken the problem still continues. 

[1] AIR 2005 SC 3353

[2] Civil Procedure Code 1908, Order XXXII A Rule 3

[3] 1981 AIR 2075, 1982 SCR (1) 842

[4] 1858 28 LJ CH 184: 53 ER 916

[5] 1999 Arb. WLJ 704 (SC)

[6] P.T. Thomas v. Thomas Job, 2005 (4) ALR 150 (SC)

[7] AIR 1999 DEL 88

Author: Anubhav Jindal

Editor: Kanishka VaishSenior Editor, LexLife India.

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