Alternative Dispute Resolution – Arbitration, Mediation, Conciliation (Concept; Purpose and Application)

Alternative Dispute Resolution – Arbitration, Mediation, Conciliation (Concept; Purpose and Application)

By Manish Mehrotra**

Advocate

( As Speaker at Refresher Training Programme for Additional District Judges & civil Judges (Sr. Div)( 3 batches)  in Institute of Judicial Training, Lucknow. U.P. on 20-7-2012; 30-8-2012 & 13-9-2012)

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CONCEPT:

In 1927 an English Judge Justice Marten of Bombay High Court said

“It (arbitration) is indeed a striking feature of ordinary Indian life.  And I would go further and say that it prevails in all ranks of life to a much greater extent than is the case in England.  To refer matters to a Panch is one of the natural ways of deciding many a dispute in India”.

Corpus Juris Secundum ( Volume VI) defines an arbitration as under:-

“ The settlement of controversies by arbitration is a legally favoured contractual proceeding of common law origin by which the parties by consent submit the matter for determination to a tribunal of their own choosing on substitution for the tribunals provided by the ordinary process of the law”

CODIFIED LAW IN INDIAN CONTEXT FOR ALTERNATIVE DISPUTE RESOLUTION:

The history of codified law on Arbitration is India is Indian Arbitration Act, 1899; Indian Arbitration Act, 1940 and now Arbitration and Conciliation Act, 1996 each enacted keeping in view the development of law in the sphere and keeping in pace with the requirements in law with changing times.

PURPOSE OF LAW

Arbitration and Conciliation Act, 1996 is an Act to consolidate and amend the law, relating to domestic Arbitration and International Commercial Arbitration.  Untied Nations Commission on International Trade Law (UNICITRAL) adopted the UNICITRAL Model law on International Commercial Arbitrations in 1985; thereafter the General Assembly of the United Nations had recommended that all countries give DUE CONSIDERATION TO THE SAID Model Law, in view of desirability of uniformity of law of arbitral procedures and the specific needs of international commercial arbitration practice.  Keeping in view the international norms our Parliament enacted the Arbitration and Conciliation Act, 1996.  The scope of the topic will be incomprehensive if we do not notice the statement and objects of the legislature which is the bedrock of the New Arbitration law in India.

Quote :

1)           To comprehensively cover international and commercial arbitration and conciliation as also domestic arbitration and conciliation;

2)           To make provision for an arbitral procedure which is fair, efficient and capable of meeting the needs of the specific arbitration.

3)           To provide that the arbitral tribunal gives reasons for its arbitral award;

4)           To ensure that the arbitral tribunal remains within the limits of its jurisdiction;

5)           To minimize the supervisory role of Courts in the arbitral process;

6)           To permit an arbitral tribunal to use mediation, conciliation or other procedures during the arbitral proceedings to encourage settlement of disputes;

7)           To provide that every final arbitral award is enforced in the same manner as if it were a decree of the Court;

                       

8)           To provide that a settlement agreement reached by the parties as a result of conciliation proceedings will have the same status and effect as an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral Tribunal; and

9)           To provide that, for purposes of enforcement of foreign awards, every arbitral award made in a country to which one of the two international Conversations relating to foreign arbitral awards to which India is a party applies, will be treated as a foreign award.

MY EXPERIENCE WITH LITIGANTS

If we cull out the settled law from various Judicial pronouncements it would be clear that settlement of disputes between the parties has a tradition in this country as I had pointed out in the beginning of this article.  We cannot deny the overburden of litigation in courts.  It is also true that the Judicial System prevalent in courts is governed by procedures prescribed by various enactments and several of which are technical and obstruct the adjudication resulting in delays.  We have to appreciate that the litigant of today is often frustrated and exhausted due to delays.  All his enthusiasm of his rights enforcement dies with time and soon comes a time when he just wants the decision irrespective of its outcome; this I have clearly observed as a lawyer in last two decades of my practice.

Therefore I feel that the purpose of alternative mechanism for resolution of disputes has been evolved for resolution of disputes through the process of Arbitration; Conciliation and Mediation to ensure fair and efficient, speedy trial giving finality to the decision.

RUSSEL ON ARBITRATION 23^rd  EDN

Russel on Arbitration is one of the Classic legal reference works.  Courts and Practitioners and all those involved in arbitrations use this as one of the most powerful reference tool.

Arbitration Features:-

·                    Party Autonomy is recognized as paramount and court intervention is expressly excluded except as specified in the Act;

·                    A general duty is imposed on the arbitral tribunal to act fairly and impartially and to adopt procedures that avoid unnecessary delays or expense.

·                    The object of arbitration is to obtain the fair resolution of disputes by an impartial tribunal without unnecessary delay or expense.

·                    The parties should be free to agree how their disputes are resolved subject only to such safeguards as are necessary in public interest; and

·                    Intervention by courts should be restricted.

Justice Benjamin Cardozo

Aptly said by him: JUDGES OUGHT TO BE IN SYMPATHY WITH    THE SPIRIT OF THEIR TIMES. Thus the need of the Hour is ADR Mechanism

ADR IS NEED OF THE HOUR

1.   Delay is a great hurdle in justice delivery System today.

2.   Litigant of today wants expeditious disposal.

3.   It is a must for all of us  to keep alive the faith of the people in the judicial system.

4.   Law is dynamic hence must respond to changing times.

5.   Technicalities must give way to substantial justice. (focus of ADR)

APPLICATION OF LAW

Looking to the significance and necessity of Alternative Disputes Redressal ; the Civil Procedure Code (by Amending Act, 1999) carried out an amendment and inserted Section 89 of the Civil procedure Code; which reads as under:-

Quote:

S. 89.  Settlement of disputes outside the Court – (1) Where it appears to the court that there exist elements of a settlement which may be acceptable to the parties, the court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties, the court may reformulate the terms of a possible settlement and refer the same for –

(a)         arbitration;

(b)         conciliation;

(c)         judicial settlement including settlement through Lok Adalat; or

(d)         mediation.

(2)         Where a dispute has been referred –

(a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply as if the proceedings for arbitration of conciliation were referred for settlement under the provisions of that Act;

(b) to Lok Adalat, the court shall refer the same to the Lok Adalat in accordance with the provisions of sub-section (1) of Section 20 of the Legal Services Authority Act, 1987 (39 of 1987) and all other provisions of that Act shall apply in resp9ect of the dispute to referred to the Lok Adalat;

(c) for judicial settlement, the court shall refer the same to a suitable institution or person and such institution or person shall be deemed to be a Lok Adalat and all the provisions of the Legal Services Authority Act, 1987 (39 of 1987) shall apply as if the dispute were referred to a Lok Adalat under the provisions of that Act;

(d) for mediation, the court shall effect a compromise between the parties and shall follow such procedure as may be prescribed.

A bare perusal of Section 89 of CPC demonstrates that in all Civil litigations the courts have to encourage settlement of disputes outside the court.

JUSTICE MALLIMATH COMMITTEE

While discussing about the philosophy behind Section 89 of CPC; reference to Justice Malimath Committee report is a must

“If a law is enacted giving legal sanction to such machinery for resolution of disputes and resort thereto is made compulsory, much of the inflow of commercial litigation in regular civil courts gradually moving up hierarchically would be controlled and reduced.”

The Malimath Committee while elaborating the importance of conciliation also suggested “the senior members of the bar, amongst others are invited for personal discussions by the District Judge; Additional District Judges …….. with  a view to impressing upon them ……..their willing participation in settlement…..which will result in saving time and sparing them of the trouble of calling witnesses, subjecting them to long drawn examination, cross examination and arguments.”

CASE OF AFCON INFRASTRUCTURE 2010( 8) SCC 24:

The Hon’ble Apex Court in the case of Afcon Infrastructure (supra) has exhaustively dealt with the manner in which section 89 of the code of civil procedure has to be given effect to in its practical application. Some of the salient features need to be discussed today.

Is Section 89 Mandatory ?

Section 89 starts with the words “where it appears to the court that there exist elements of a settlement”. This clearly shows that cases which are not suited for ADR process should not be referred under Section 89 of the Code. The court has to form an opinion that a case is one that is capable of being referred to and settled through ADR process. Having regard to the tenor of the provisions of Rule 1-A of Order 10 of the Code, the civil court should invariably refer cases to ADR process. Only in certain recognised excluded categories of cases, it may choose not to refer to an ADR process. Where the case is unsuited for reference to any of the ADR processes, the court will have to briefly record the reasons for not resorting to any of the settlement procedures prescribed under Section 89 of the Code. Therefore, having a hearing after completion of pleadings, to consider recourse to ADR process under Section 89 of the Code, is mandatory. But actual reference to an ADR process in all cases is not mandatory. Where the case falls under an excluded category there need not be reference to ADR process. In all other cases reference to ADR process is a must. (Para:26)

Cases Not included under S.89 as per Afcon

—  The following categories of cases are normally considered to be not suitable for ADR process having regard to their nature:

—  (i) Representative suits under Order 1 Rule 8 CPC which involve public interest or interest of numerous persons who are not parties before the court. (In fact, even a compromise in such a suit is a difficult process requiring notice to the persons interested in the suit, before its acceptance).

—  (ii) Disputes relating to election to public offices (as contrasted from disputes between two groups trying to get control over the management of societies, clubs, association, etc.).

—  (iii) Cases involving grant of authority by the court after enquiry, as for example, suits for grant of probate or letters of administration.

—  (iv) Cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion, etc.

—  (v) Cases requiring protection of courts, as for example, claims against minors, deities and mentally challenged and suits for declaration of title against the Government.

—  (vi) Cases involving prosecution for criminal offences.

     (Para 27)

Cases Included under S.89 as per Afcon

—  All other suits and cases of civil nature in particular the following categories of cases (whether pending in civil courts or other special tribunals/forums) are normally suitable for ADR processes:

—  (i) All cases relating to trade, commerce and contracts, including

—   disputes arising out of contracts (including all money claims);

—  disputes relating to specific performance;

—  disputes between suppliers and customers;

—  disputes between bankers and customers;

—  disputes between developers/builders and customers;

—  disputes between landlords and tenants/licensor and licensees;

—  disputes between insurer and insured;

—  All cases arising from strained or soured relationships, including

—  disputes relating to matrimonial causes, maintenance, custody of children;

—  disputes relating to partition/division among family members/coparceners/co-owners; and

—  disputes relating to partnership among partners.

—  (iii) All cases where there is a need for continuation of the pre-existing relationship in spite of the disputes, including

—  disputes between neighbours (relating to easementary rights, encroachments, nuisance, etc.);

—   disputes between employers and employees;

—  disputes among members of societies/associations/apartment owners' associations;

—  All cases relating to tortious liability, including

—  claims for compensation in motor accidents/other accidents; and

—  (v) All consumer disputes, including

—  disputes where a trader/supplier/manufacturer/service provider is keen to maintain his business/professional reputation and credibility or product popularity.

—  The above enumeration of “suitable” and “unsuitable” categorisation of cases is not intended to be exhaustive or rigid. They are illustrative, which can be subjected to just exceptions or additions by the court/tribunal exercising its jurisdiction/discretion in referring a dispute/case to an ADR process.

Arbitration as per S.89 as per Afcon

(Para : 32 & 34 of the judgement):

—  Arbitration is an adjudicatory dispute resolution process by a private forum, governed by the provisions of the AC Act. The said Act makes it clear that there can be reference to arbitration only if there is an “arbitration agreement” between the parties. If there was a pre-existing arbitration agreement between the parties, in all probability, even before the suit reaches the stage governed by Order 10 of the Code, the matter would have stood referred to arbitration either by invoking Section 8 or Section 11 of the AC Act, and there would be no need to have recourse to arbitration under Section 89 of the Code. Section 89 therefore presupposes that there is no pre-existing arbitration agreement.

—  If there is no agreement between the parties for reference to arbitration, the court cannot refer the matter to arbitration under Section 89 of the Code. This is evident from the provisions of the AC Act. A court has no power, authority or jurisdiction to refer unwilling parties to arbitration, if there is no arbitration agreement. This Court has consistently held that though Section 89 of the Code mandates reference to ADR processes, reference to arbitration under Section 89 of the Code could only be with the consent of both sides and not otherwise.

Procedure to be followed by Courts as per AFCON

(Para 43):

—  We may summarise the procedure to be adopted by a court under Section 89 of the Code as under:

—  (a) When the pleadings are complete, before framing issues, the court shall fix a preliminary hearing for appearance of parties. The court should acquaint itself with the facts of the case and the nature of the dispute between the parties.

—  (b) The court should first consider whether the case falls under any of the category of the cases which are required to be tried by courts and not fit to be referred to any ADR processes. If it finds that the case falls under any excluded category, it should record a brief order referring to the nature of the case and why it is not fit for reference to ADR processes. It will then proceed with the framing of issues and trial.

—  (c) In other cases (that is, in cases which can be referred to ADR processes) the court should explain the choice of five ADR processes to the parties to enable them to exercise their option.

—  (d) The court should first ascertain whether the parties are willing for arbitration. The court should inform the parties that arbitration is an adjudicatory process by a chosen private forum and reference to arbitration will permanently take the suit outside the ambit of the court. The parties should also be informed that the cost of arbitration will have to be borne by them. Only if both parties agree for arbitration, and also agree upon the arbitrator, the matter should be referred to arbitration.

—  If the parties are not agreeable for arbitration, the court should ascertain whether the parties are agreeable for reference to conciliation which will be governed by the provisions of the AC Act. If all the parties agree for reference to conciliation and agree upon the conciliator(s), the court can refer the matter to conciliation in accordance with Section 64 of the AC Act.

—  (f) If the parties are not agreeable for arbitration and conciliation, which is likely to happen in most of the cases for want of consensus, the court should, keeping in view the preferences/options of parties, refer the matter to any one of the other three ADR processes: (a) Lok Adalat; (b) mediation by a neutral third-party facilitator or mediator; and (c) a judicial settlement, where a Judge assists the parties to arrive at a settlement.

—  (g) If the case is simple which may be completed in a single sitting, or cases relating to a matter where the legal principles are clearly settled and there is no personal animosity between the parties (as in the case of motor accident claims), the court may refer the matter to Lok Adalat. In case where the questions are complicated or cases which may require several rounds of negotiations, the court may refer the matter to mediation. Where the facility of mediation is not available or where the parties opt for the guidance of a Judge to arrive at a settlement, the court may refer the matter to another Judge for attempting settlement.

—  (h) If the reference to the ADR process fails, on receipt of the report of the ADR forum, the court shall proceed with hearing of the suit. If there is a settlement, the court shall examine the settlement and make a decree in terms of it, keeping the principles of Order 23 Rule 3 of the Code in mind.

—  If the settlement includes disputes which are not the subject-matter of the suit, the court may direct that the same will be governed by Section 74 of the AC Act (if it is a conciliation settlement) or Section 21 of the Legal Services Authorities Act, 1987 (if it is a settlement by a Lok Adalat or by mediation which is a deemed Lok Adalat). If the settlement is through mediation and it relates not only to disputes which are the subject-matter of the suit, but also other disputes involving persons other than the parties to the suit, the court may adopt the principle underlying Order 23 Rule 3 of the Code. This will be necessary as many settlement agreements deal with not only the disputes which are the subject-matter of the suit or proceeding in which the reference is made, but also other disputes which are not the subject-matter of the suit.

—  (j) If any term of the settlement is ex facie illegal or unenforceable, the court should draw the attention of parties thereto to avoid further litigations and disputes about executability.

(Para 44):

—  The court should also bear in mind the following consequential aspects, while giving effect to Section 89 of the Code:

—  (i) If the reference is to arbitration or conciliation, the court has to record that the reference is by mutual consent. Nothing further need be stated in the order-sheet.

—  (ii) If the reference is to any other ADR process, the court should briefly record that having regard to the nature of dispute, the case deserves to be referred to Lok Adalat, or mediation or judicial settlement, as the case may be. There is no need for an elaborate order for making the reference.

—  (iii) The requirement in Section 89(1) that the court should formulate or reformulate the terms of settlement would only mean that the court has to briefly refer to the nature of dispute and decide upon the appropriate ADR process.

—  (iv) If the Judge in charge of the case assists the parties and if settlement negotiations fail, he should not deal with the adjudication of the matter, to avoid apprehensions of bias and prejudice. It is therefore advisable to refer cases proposed for judicial settlement to another Judge.

—  If the court refers the matter to an ADR process (other than arbitration), it should keep track of the matter by fixing a hearing date for the ADR report. The period allotted for the ADR process can normally vary from a week to two months (which may be extended in exceptional cases, depending upon the availability of the alternative forum, the nature of case, etc.). Under no circumstances the court should allow the ADR process to become a tool in the hands of an unscrupulous litigant intent upon dragging on the proceedings.

—  (vi) Normally the court should not send the original record of the case when referring the matter to an ADR forum. It should make available only copies of relevant papers to the ADR forum. (For this purpose, when pleadings are filed the court may insist upon filing of an extra copy). However if the case is referred to a court annexed mediation centre which is under the exclusive control and supervision of a judicial officer, the original file may be made available wherever necessary.

** Manish Mehrotra, Advocate, 10/6 Madan Mohan Malviya Marg, Lucknow. Mobile: 91-9415016285 

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