CRITIQUES OF THE ADR MECHANISMS IN INDIAN LAW

 

 

 

INTRODUCTION

 

Alternative dispute resolution (ADR) is a cost-effective way to resolve conflicts without going through the traditional court process. It offers several advantages, but there are also criticisms.

One concern is that ADR might not always provide fair justice and could be seen as a “second-class” option, especially for those who cannot afford regular courts. ADR focuses on finding solutions together rather than a clear winner or loser.

Critics argue that ADR encourages compromise, which may not be suitable for all cases, particularly in serious disputes involving moral values.

Additionally, ADR settlements are private, which raises concerns about certain issues not receiving adequate public attention. Unlike court rulings, ADR settlements might not require public disclosure or action.

In India, ADR methods like arbitration, mediation, and conciliation are becoming popular due to their benefits in the current social and economic conditions. However, it’s crucial to recognize the weaknesses of ADR, which can be influenced by various factors that may not be immediately evident.

 

 

JUDICIAL INTERVENTION IN ARBITRATION

 

Critique of Judicial Intervention under the Act of 1996

 

The Arbitration and Conciliation Act of 1996 in India aimed to improve the efficiency of arbitration as a preferred method for resolving disputes. The older law from 1940 led to excessive court interference, causing delays and inefficiencies in the arbitration process.

The 1996 Act’s main goal was to reduce court involvement, making arbitration quicker and more cost-effective. It aimed to avoid unnecessary delays and expenses, ensuring better access to justice. The Act also sought to gain the confidence of the international business community, given India’s growing trade relations with other countries.

According to the 1996 Act, courts should only intervene in specific situations mentioned in different sections. These include matters like interim measures, appointment of arbitrators, termination of an arbitrator’s mandate, assistance in evidence collection, setting aside arbitral awards, and limited intervention in foreign awards.

The Act’s primary objective is to limit court interference, making arbitration a more efficient and effective way of resolving disputes. However, in some cases, arbitration has become similar to litigation with delays and court involvement, which goes against the Act’s original intent.

 

Scope of Judicial Intervention under Act of 1996: Some Judicial Pronouncement

 

Arbitration and Conciliation Act of 1996 – Section 34 & 37 Explained

The Arbitration and Conciliation Act of 1996 allows parties to challenge arbitral awards on limited procedural grounds under Section 34. Unfortunately, some parties misuse this provision to avoid executing awards that go against their interests. Section 37 of the Act allows appeals from court decisions made under Section 34 and decisions regarding interim measures.

The Act was designed to promote quick and efficient dispute resolution through arbitration. However, the appeals process can sometimes lead to unnecessary judicial intervention. One ground for setting aside an award under Section 34 is if it goes against the public policy of India. There has been debate over interpreting this ground, with the introduction of “patent illegality” in a previous Supreme Court case, allowing awards to be challenged based on legal flaws or differences of opinion on contract interpretations.

A case called Bhatia International caused confusion by applying Part I of the Act (applicable to domestic arbitrations) to arbitrations held outside India, potentially interfering with foreign awards. However, the BALCO case later overruled this decision, clarifying that Part I only applies to arbitrations seated in India.

Recently, the Shri Lal Mahal case distinguished between setting aside a domestic award under Section 34 and enforcing a foreign award under Section 48, clarifying the definition of “public policy” in these scenarios.

Despite the Act’s aim to make arbitration efficient, some complaints include the lack of specific time limits for completing arbitrations and arbitrators granting long adjournments similar to court practices. Additionally, the Act has led to increased judicial intervention, and parties may approach arbitration with a litigation mindset.

Overall, while the Act intends to improve dispute resolution through arbitration, there are challenges and areas that need further clarification and improvement.

 

 

A CRITIQUE OF SETTLEMENT MECHANISMS

 

Not all disputes are suitable for alternative dispute resolution (ADR). Some cases must be handled in court because there’s no other informal resolution method available. Specific laws like the Legal Services Authorities Act and the Code of Civil Procedure dictate which disputes can be referred to ADR.

If a case referred to ADR remains unresolved, parties may have to resort to court, wasting the time and money spent on ADR.

ADR might have a slight possibility of bias or conflict of interest, particularly if a neutral person frequently handles cases from the same institution.

Confidentiality is a significant advantage of ADR, but it can be challenging in practice as certain arbitration details may need to be disclosed, compromising confidentiality.

Judicial review in ADR is limited. Once an arbitral award is given, it’s considered final and binding, with little opportunity for appeal.

The lack of a standardized procedural system in ADR may lead to rare cases of abuse of power by arbitrators, mediators, or conciliators.

Decisions in ADR cannot establish legal precedents, and each case is treated independently without setting guiding principles for future similar cases.

 

Unfamiliarity with the Procedure and Lack of Awareness

One of the main challenges with alternative dispute resolution (ADR) is its relative novelty, leading to unfamiliarity among many people. The lack of awareness about ADR often deters parties from considering it as a viable option.

While some view ADR as a replacement for traditional litigation and celebrate its success, we should appreciate ADR for its unique merits rather than comparing it to the court system’s failures. The need for ADR has emerged due to the shortcomings of our court systems and public grievance redressal mechanisms.

Concerns exist about the accountability of public and private institutions when disputes involving public interest are resolved privately and confidentially. The loss of legal precedents and public standards of conduct is also a concern, though it’s worth noting that a majority of cases in India are still pending in courts and haven’t been referred to ADR mechanisms.

However, there is a need for judicial reform that promotes settlements with justice and equity, creating important precedents even in ADR cases.

Critics argue that ADR assumes equal bargaining power between parties, but in reality, financial resources may be distributed unevenly, impacting a party’s negotiation ability. This disparity is especially evident when one party is a powerful entity like a corporation or the state, and the other party is financially disadvantaged.

These observations about settlement differences are not just relevant in the American context but are also applicable in India. Procedural shortcomings and the lack of mechanisms for swift dispute resolution in our justice system often discourage litigants from pursuing remedies in court.

 

SUMMARY

The alternative dispute resolution (ADR) system is a crucial mechanism for resolving conflicts in a harmonious and efficient manner. It offers individuals and businesses an alternative to the time-consuming and costly court process. As societal attitudes change and economic activity increases, ADR is expected to play an even more significant role in managing disputes.

Benefits of ADR: ADR methods, such as mediation and arbitration, offer balanced and amicable solutions to disputes. With the court system in India already facing substantial workloads, ADR can provide long-term benefits by reducing the burden on the courts. Moreover, the growing popularity of ADR on an international level indicates the potential for reducing unresolved disputes in the future.

Quicker Justice: One of the primary advantages of ADR is its ability to deliver justice without long delays. While ADR may not be perfect and has its drawbacks, it fulfills the famous saying, “justice delayed is justice denied.” ADR ensures quicker resolutions, allowing parties to move forward with their lives and businesses.

Conclusion: In conclusion, the rise of the alternative dispute resolution (ADR) system signifies a positive shift towards more efficient and gratifying ways of resolving conflicts. As ADR continues to evolve, its benefits are becoming increasingly apparent, making it a valuable tool for both individuals and businesses seeking timely and fair resolutions