Justice DeliverySysBe and LauU

Reformsin the
876
18.7.3 Arbitration
Arbitration means the proccss of having a civil dispute setled by_a
involves
the dispute. It
the decision
person or
of one
group
inyolvedlin
reference
notor nore perSONs, of Some matter/s in differenceto
to Black's Law Dictionary, "arbitration
According
betweenthe partics. and abidingby
the judgment of
is an
arrangement fortaking
disputed matter, instead of carrying to sele
establishedcted
avoidthe formalities, the delay, thetrË-
personsin sone intended to
expense
bunalsofand andisof ordinary litigation." Arbitration may or nay
vexation
justice,
not be administered by permanent arbitration tribunal (Section 2(b)1
adjudication, and hence all
impartial function
The naturehearing,
is features
like
of its rational appreciation of evidence and application
of relevant law to relevant facts are envisaged in arbitration. Disputes
business, services
oCcurring in the course of trade,
involve technical issues like
partnerships, par-or
tition or succession often
experts.Economic interests demand swift
valuation
estimation by to reputation, and
disposalcoof
without
cases without publicity and damage and formalitiesIn
plex and time consuming
procedures international
is the principal method ot
trade, the practiceof commercial arbitration International Chamber ot
resolving disputes between trading parties. arbitra
Commerce streamlined the European method of commercialadontod
Law
tion. United Nations Commission on International Trade
UNCITRAL Model Law on International Commercial Arbitration in
1985, which laid down a legal farm work for fair, amicable and efficient
settlement of disputes.
Indian tradition of arbitration is traceable to Panchayat system
andbodies like shreni, kula and puga. The Bengal Regulations by the
British during the 18th century recognised the arbitration awards
other than those brought through corruption. The Civil Procedure
Code of 1859, 1877, 1882 and 1908 recognised the arbitration proceed
ings and gave effect to their awards. The Arbitration Act, 1899, appli
cable in Presidency towns, extended the arbitration proceeding to
cases not pending before court of law. The Arbitration (Protocol and
Convention) Act, 1937 aimed at giving effect to foreign arbitral awards.
The Arbitration Act, 1940 dealt with () arbitration without intervention
of acourt (ü) arbitration with interyention of
court where no
pending and (ii) arbitration in suits. Courts had the power of suit is
ing the time for making award and extena
removing
ducting arbitrator. All awards were to be the dilatory or miscon
and decree before being enforced. followed up by a judgment
costs and uncertainty made the Delay, duplicity of proceeding
lapse under the downpour of mechanism, a weak instrument tounder COP
the
Chairmanship litigation.
of Justice HR. The Law Commission,
Khanna recommended in 1978for
 Alternative Dispute Resolution (ADR) System 877
avoiding the reasons for delay by introducing deeming clause about
eonsent to arbitration,non-termination owing to death of parties, limi
tation on extension of the period of arbitration and for enforcement of
the award. The Supreme Court pointed out the need for making the
Law of arbitration simple, less technical and more responsible to the
realities of situation,'47
In order to upgrade the Arbitration Act, 1940 and for
conforming
to UNCITRAL, Model, in 1996, the Arbitration and Conciliation Act
wAs passed. It comprehensively covers international commercial arbi
tration88 and conciliation as also domestic arbitration and concilia
tion. It compels the®Arbitral Tribunal to remain within the limits of
its jurisdiction and to give reasons for its arbitralaward. It minimises. )
the supervisory role of courts in thearbitral process and provides that
Tevery arbitral award is enforced in the same manner as if it were a
decree of the court. It makes provision for an arbitral procedure which
is fair, efficient and capable of meeting the needs of specific arbitra
tion. There are elaborate provisions about rule against bias and right
to be heard and remedies like setting aside of arbitral award in case|
of partisan decisions. Flexibility of procedure, lesser formalities, and
)speedy resolution of disputes are the teatures of arbitration. The Act
of 1996 provides for enforcement of foreign arbitral awards made in
a country where one of the two International conventions relating to
foreign Arbitral awards to which India is a party, applies.
Existence of duly signed arbitration agreement or arbitration clause
3 in any agreement is a pre-requisite for commencement of arbitration
proceeding (Section 7). Occurrence of dispute necessitates appoint
ment of arbitrator. The parties are free to agree on a procedure to
appoint the arbitrator or arbitrators. If three arbitrators are to be
appointed, unless otherwise laid down by the agreemnent, each party
shall appoint one arbitrator each and the two appointed arbitrators
shall appoint the third arbitrator, who shall act as the presiding arbi
trator. In case of failure to appointany arbitrator orsole arbitrator, the
appointment shallbe made, upon request by the parties, by the Chief
Justice or any person or institution designated by him. The power of
187
Food Corpn. of India v. Joginderpal Mohinderpal, (1989) 2 SCC 347: AIR 1989 SC
1263.
18 "2() "international commercial arbitration" means an arbitration relating to
disputes arising out of legal relationships, whether contractual or not, considered as
commercial under the law in force in India and where at least one of the parties is:
() an individualwho is a national of, or habitually resident in,any country other
than India; or
(n) a body corporate which is incorporated in any country other than India; or
(ii) a company or an association or a body of individuals whose cerntral
management and control is exercised in any country other than India; or
(i) the Government of a foreign country."
878 Reforms I1 the juS nd LaW
Chief Justice in making appointment was regarded in Konkan
as administrative power and
ing writ of mandamus, This
the failure could be remedied
approach was overruled in by
SBP and Co.
Railwisasu-y
casel9° and the appointment power was regarded as judicial,
Cremedy could be through certiorari. "9" The appointed
and the
disclose the circumstances that cloud impartiality. Only in arbitrator shall
doubts about impartiality and lack of adequate qualifications,
tor's appointment may be challenged. Failure or impossibility onarbitra-
part of arbitrator to act or his withdrawal or agreement of
parties for
termination will result in termination of the arbitrator (Sections
its own14juris
15))The arbitration tribunal has the power of deciding its and
diction including the ruling on any objection with respect to
ity of agreement. Time limit is prescribed for raising valid
jurisdiction. objection against
Acardinal principle relating to arbitration proceeding is that the
parties shall be treated with equality and each party shall be
fulll opportunity to present his case(Section 18).The place of given a
shall be decided on the basis of
that the arbitral tribunal shall not agreement (Section 20). The principle
be bound by_ the Civil
agreement
Code and the Indian Evidence Act and
that the
Procedure
on the arbitral procedure, parties are free to agree
quick disposal of cases. provides for adequate flexibility, facilitating
The intervention of courts in the
confined to narrow area. matter of arbitration
may be set aside by the Court According to Section 34(2) proceeding
An arbitral award
is
cation only if () the party making the appli
(ii) the furnishes proof that () a party was under
arbitration agreement isnot valid under thesome incapacity; or
making the application was not
given law; (iii) the party
of an arbitrator or of the arbitral proper notice of the appointment
to present his case; or proceedings or was otherwise unable
(tv) the arbitral
contemplated by or not falling award deals with a dispute not
within
arbitration,orto it contains decisions on the terms of the submission to
submission
or the arbitration: () the matters beyond the scope of the
arbitral procedure was not in
of the parties, composition of the arbitral
tribunal
or, (b) the Court
dispute is not capable of accordance
finds that (i) the with the
agreement
19 settlement
SC 2821.Konkan Rly. Corpn. Ltd. v.
by
arbitration subject-matterof the
under the law tor
Mehul
190
Sikri,
SBP & Co. v.
Patel Engg. Ltd., Constructions
Co., (2000) 7 SCC 201: AIR 2000
"Trends and (2005) 8SCC 618. For a
pp.Devel
49, 58.opments Arbitration in India anddiscussion see,
7Nyaya in
191 ForDeep
at Justice A.K.
an
Patil, "Nature ofapproach that this is a Region'" (October 2007
Chief Justice's
Bangalore Law Journal commendabl
at p. 277. power of e one see
appointing arbitrators: Chidananda Reddy S.
An analysis" (2008) 3
 Alternative Dispute Resolution (ADR) System 879

she time being in force, or (ii) the arbitral award is in conflict with the
publicpolicy of India. Whe interpretation of "public policy" has been
nroblematic issue. In the ONGC case'% the Supreme Court viewed that
public policy connoted some matter which concerned public good and
the public interest. The award could be set aside if it was opposed to
hundamental policy of Indian law; or the interest of India;or justice or
morality, or in addition, if it is patently illegal. Ilegality must go to the
root of the matter and if the illegality is of trivial nature it cannot be
held that award is against the public policy] Award could also be set
eide if it is so unfair and unreasonable that it shocks the conscience
afthe Court Two criticismsleveled against this interpretation can be
Jogked intofirst that because of the failure to structurise the concept
it is likely to continue as unruly horse opening the floodgate of chal
lenges and defeat the efficacy of the Act;"93 and &econd) that evolution
of state-based multiple standards of public policy will produce unnec
essary pluralism and confusion making the UNCITRAL model dif
ficult for implementation,"4
One important development owing to the 1906 Act is that the arbi
tral award shall be final and binding upon the parties (Section 35) and
shallbe enforcedunder CPCin the same manner as if it were a decree
of the court (Section 36). This avoids dilatory litigation occurring in
court's review and judgment on arbitration and incorporation of the
award into decree.
From the perspective of social transformation, the 1996 Act is a land
mark development as it has built a strong mechanism of ADR. Now it
iscommon practice that in metropolitan and commercial cities large
number of cases having big economicstake or involving technical or
accounts issue is referred to the arbitrators. Commercial agreements
generally include arbitration clause.
18.7.4 Conciliation
a)
Conciliation is settlement of disputes without litigation. It is a process
of Bersuading parties, without imposition, to reach an amicable set
tlement through the participation by an impartial conciliator. Unlike
-arbitration, it involves no judicial process.95 The Arbitration and
Conciliation Act, 19g6 governs conciliation of disputes arising out of
SC
192 Oil & Natural Gas Corpn, Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705: AIR 2003
2629.
199 Chidanand Reddy S. Patil, "Arbitral Award on Slippery Slope of Public Policy'"
(2006) 2 Kant Law Journal 62 at pp. 70-71.
H Redfern and Martin Hunter cited by Justice AK Sikri, "Trends and Developments
in Arbitration in India and Region" (October 2007) 7Nyaya Deep 49 at pp. 58S2.
19* R.D. Rajan, op. cit., at pp. 228-29.
 880 Reforms in theJustice DeliverySystem,, Modernisation and Law
not and to all
relationship, whether contractual or
legal
relating thereto. The parties may agree for sole conciliator or appoint
one each or have athird conciliator(Scction 64). The law requires con-
proceedings
to beindependent and impartial and to be guided by
ciliators
ples of objectivity, fairness and justice (Section 67). The conciliator
the parties are bound to keep confidential, all matters relating to the
and princi-
conciliatorshould disclose the
conciliation proceedings. But
of the information about any fact relating to the dispute from a party
to the other party (Section z0). Cooperation of parties with the concili-
substance
ator is insisted.
The cole of the conciliator/s is to assist the partiesto reach an ami-
cable settlement of the dispute. The procedure of conciliation Com-
mences with the acceptance of the proposal made bythe other party
lonneninviting to conciliate and identifying the issues. After the
appoint-
ment of the conciliator by the parties, the conciliator may request each
party to submit brief written statement. He may invite the parties to
meet him and has discretion to conduct the proceedings according to
the expediency of the situation (Section 69). He may take administra.
tive assistance with the consent of parties (Section 68). He may make
proposal for settlement at any stage of conciliation proceeding. The
proposal might be reformulated in the light of observation of parties
(Section z3). Ifthe parties reach an agreement the drafting of the settle.
ment agreement willbe done. Such settlement has the same statusand
effect as an arbitral award (Section 74). The conciliators are prohibited
from acting as arbitrator, counsel representative or witness (Section
8o). The conciliation proceeding comes toan end with the settlement
of dispute or conciliator's declaration that no further effort of concilia
tion was justified (Section 76). Conciliator's shuttling act of diplomacy,
negotiation and reducing of differences between the parties contrib
utes to resolution of disputes.
Under the Industrial Disputes Act, 1948, resolution of disputes
through Conciliation Officer and Conciliation Board is contemplated.
The Conciliation Officer has the duty of investigating the dispute and
all the connected matters and may doall such things as he thinks fit for
the purpose of inducing the parties to come to a fair and amicable set
tlement of disputes (Section 12). He shall send report to the appropriate
government within fourteen days. Although he has no power of mak
ing final order!96 his function makes good contribution in the direction
of restoring industrial peace. National Commission on Labour, 1969
has suggested for conferring more powers to the Conciliation Officer.
The Board of Conciliation has also the duty of investigating the dis
pute and all the connected matters and may do all such things as it
196 Security Paper Mill v. R.S. Sharma, (1986) 2 SCC 151: (1986) 1 LLJ
432 (SC).
 Alternative Dispute Resolution (ADR) System 881

thinks fit for the purpose of inducing the parties to come to a fair and
amicable settlement of disputes whenever the dispute is referred to it
bythe appropriate government (Section 13). The report given by the
board may be given effect by the Government.
18.7.5 Mediation
Mediation is a method of bringing conciliation between parties to the
enute. Mediator is the neutral person whodoes not render a decision
on an evaluation. But he facilitates in reaching an acceptable agree-
ment. Mediation is the least adversarial approach to conflict resolution
and encourages the parties to communicate directly. Although there
is interchangeable use of the words "mediation" and "conciliation"
+here are differences between the two.Conciliation restores relation
than that
ship where mediation may not. Mediation is bit more formal whicha
of conciliation It is a consensual dispute resolution process in issues,
identify
specially trained neutral third party helps disputants to
clarify perceptionsand explore options for a mutually acceptable out
comej ln general, mediators do not offer their own opinions regarding
case. Instead, mediators offer
likely court outcomes or the merits of the
opportunity to expand the settlement discussion beyond the legal
the creative solutions, which
issues in dispute and focus on developing
emphasise the parties' practical concerns.
mediation are: it involves non-binding
The main characteristics of
encouragedtoevolye
procedure°controlled by the parties; parties are
mediator's impartial and creative role_is expected; proce
solution; is a process that empowers
confidentiality isto be maintained; it
dure's
effective and quick remnedy and accom
the poor by providing cheap,voluntary, self-responsible and satisfying;
modates give and take; it ishelps better enforcement. The procedure7
" the element of consensus UNCITRAL Conciliation rules, WIPO
down in
for mediation is laid Jagannadha Rao Committee Draft Mediation
Mediation rules and shattered faith and human rela
restores the
Rules,2003.1% Mediation removes impediments to
social value and
tions, upholds harmony as a engineering dimension consists in max
access to justice,198|Its social for acceptable solutions arising from
imisation of choices available lists the
empathy and understanding. 9|Justice S.B. Sinha
mutual completion of mediation in matters of hours
advantages of mediation:
197 R.D. Rajan op. cit., at pp. 274, 287.
Law School of India University,
Bangalore
Mediation (National up his success by
D.K.Sampath, never allows an individual to build
"Mediation cooperation,
1991)at pp. 47-49.
adversary...When each individual's thinking is anchored in
humbling his towards harmony is ensured."
society's psychological orientation
"Foreword" to D.K. Sampath, op. cit, at p.
ix.
19 N.R. Madhava Menon,
 882 Reforms in the Justice Delivery System, Modernisation and I os
througha series of one to three conferences; avoidance of
cumbersome
evidentiary procedure; less cost; and parties' control over outcome of
the case.200 In contrast, the disadvantages are lack of formalised
dentiary rules of due process and lack of appeal. evi-

18.7.6 Lok Adalats

"Lok Adalat" connotes people's court and is practically known as neo
ple's festival of justice because of informal method of dispute
defined as aforum where voluntary effort aimed at settle-
ment. It is
about settlement of disputes between the parties is made through Con bringing
ciliatoryand pervasive efforts. It has the social goalofending quarrels
restoring family peace and providing succour to destitutes.
to Justice K. Ramaswamy, "Resolving disputes through Lok Adalat .According
not only minimises litigation expenditure, it saves valuable time of
the parties and their witnesses, and also facilitates inexpensiye and
prompt renmedy appropriately to the satisfaction of both the parties.
Law Legal Services Authorities Act, 1g87 provides for organisation of
Lok Adalat by the State Authority, District Authority or Supreme
Court/High Court Legal Services Committee or Taluk Legal Services
Committee at such intervals and places within its jurisdiction (Section
19).It consists of serving or retired judicial officers and other persons
of the area having requisite experience and qualification. The types
of cases at Lok Adalat include mutation of land cases, compounda
blecriminal offences, encroachment on forest lands, family disputes,
land acquisition disputes, motor accident claims and cases which are
not sub judice. Parties to pending disputes or potential disputes may
agree or apply to the court for referring the dispute to Lok Adalat
-[Section2o(1)). Lok Adalat shall act with utmost expedition to arrive at
a compromise or settlement between the parties and shall be guided
by the principles of justice, equity, fair play and other legal principles
[Section 20(4)]. In case of failure to arrive at settlement or conmpromise,
the dispute will be returned to the court [Section 20(5)]. The award of
the Lok Adalat shall be deemed to be a decree of civil court (Section 21).
Lok Adalat has powers of civil court for the purpose of commanding
and enforcing attendance of any witness and examining on oath, for
discovery and production of document etc. (Section 22).
In practice, very commendable service is done by the Lok Adalats by
settlement of large number of disputes. It has assumed the character of
movement in many states attracting NGOs and academic institutions.

210 S.B. Sinha, "Mediation:Constituents, Process and Merit" (October 2006) 7Nyaya
Deep 31 at pp. 36-37.
201 Legal Aid Newsletter December 1995.
Alternative Dispute Resolution (ADR) System 883

As on September 2007 the number of Lok Adalats held was6.05 lakhs,

cases settled 228.47 lakhs and compensation distributed Rs 6703 crores.
The details of persons benefited: 13.4 lakh SCs, 43 lakh STs, 8,2 lakh
BCS, 946 lakh women, 155 lakh children, 1.9 lakh persons in custody
and _1.5 lakh general; and total 90.4 lakh people,02
In Centre. for Legal Research v. State of Kerala", emphasising the
importance ofisocial participation in legal aid movement the Supreme
Courtobserved, "It is now acknowledged throughout the country that
the legal aid programme which is needed for the purpose of reaching
social justice to the people cannot afford to remain confined to the tra
ditional or litigation oriented legal-aid programme but it must, taking
into account the socio-economic conditions prevailing in the country,
adopt a more dynamicposture and take within its sweep what we may
callAid Schemes or the State Legal Aid and Advice Board, but we may
make it clear that such voluntary organisation or social action group
shall not be under the control or direction or supervision of the State
take
we
Government or the State Legal Aid and Advice Board because
the view that voluntary organisations and social action
groups operat
free from any Governmental
ing these programmes should be totally
Control."

18.7.7 Consumer grievance redressal forum) 9

consumers, under the Consumer
For resolving the grievances of State and National level are
Protection Act, 1986, forums at District,
goods and deficiency
to defectin
constituted. Theirjurisdictionextends adjudicative functions, because of
Although they perform
in services. formal procedures they are better oriented
composition and less
their
speedy, cheap and effective disposal of cases. Deviation from
towards clearly seen in their procedure.
pure adversarial system can be
18.7.8 Grama Nyayalaya
dispute resolution at the rural areawas rec
Participatory model of its 114th Report in 1g86 for
Commission in
ommended by the Law of judicial pyramid, keeping in mind
foundation
establishing strong
in rural area which included disputes about pos
the nature of disputes boundary dispute, problems of cultiva
session/ownership of property, family disputes]These could be bet
and petty
tion, debts, marketingcommunity's collective participation rather than
ter resolved by rural complexities. Grass root level courts, Grama
by a heap of procedural grass root participation in administrationof
Nyayalaya (GN), required
Deep.
202 Source: (October 2007) Nyaya 2195.
1986 SC
03 (1986) 2 SCC 706: AIR
 884 Reforms in the Justice Delivery System, Modernisationand Io
justice according to law with an awareness of local interest and
customs. Unmanageable backlog of cases, inordinate delay in local
of cases and exorbitant litigation costs called for
traditionalist,disposal
quick and.leffective method of dispute resolution. Synthesis chcap,
lay persons in the composition of three member local people'ssof legal and
court
was planned by the Law Commission. Taking justice to the doo: ot
people required conducting of the court proceeding in the
villages. The working paper prepared by the Law Commission concerned
Was
responded diversely by various states. About the method of
of lay judges and jurisdiction of courts, opinions varied. The selection
Central
Government drafted a Bill in 2005, which was reviewed by National
Advisory Council. NAC recommended for establishing of GN for
every 50,000 population; deletion of proposal to have two lay judges
on account of cumbersome procedure, delay, cost and fear of mistrust:
procedural improvements and reduction of costs. In 2007, the Grama
Nyayalaya Bill was framed in the light of NACrecommendations. After
deliberation in both Houses of Parliament the Grama Nyayalayas Act.
2008 was passed, and notified in January 2009. The broad features of
the Act are as follows:
1. It aimes to provide for the establishment of GN at the
grass
root level for the purposes of providing access to justice to
the citizens at their doorsteps and to ensure that
opportuni
ties for securing justice are not denied to any citizen by rea
son of social, economic or other disabilities and for matters
connected therewith or incidental thereto.
2. It extends to the whole of India except the State of Jammu
and Kashmir, the State of Nagaland, the State of Arunachal
Pradesh, the State of Sikkim and to the tribal areas.
3. For the purpose of exercising the jurisdiction and powers con
ferred on a GN by this Act, the State Government, after con
sultation with the High Court, may, by notification, establish
one or more GN for every Panchayat at intermediate level
or agroup of contiguous Panchayats at intermediate level
in a district or where there is no Panchayat at intermediate
level in any State, for a group of contiguous Gram Panchay
ats. The headquarter of Panchayat shall be that of GN.
A person shall not be qualified to be appointed as a Nyay
eig yadhikari unless he is eligible to be appointed as a Judicial
Magistrate of the First Class. While appointing a Nyaya
dhikari, representation shall be given to the members of the
Scheduled Castes, the Scheduled Tribes, women and such
other classes or communities as may be specified by notifl
cation, by the State Government from time to time.
Alternative Dispute Resolution (ADIR) System 885

5. The Nyayadhikarishall periodicallyvisit the villages falling

under his jurisdiction and conduct trial or proceedings at
any place which he considers is in close proximity to the
place where the parties ordinarily reside or where the whole
or part of the cause of action had arisen. But when the GN
decides to hold mobile court outside its headquarters, it shall
give wide publicity as to the date and place where it proposes
to hold mobile court. The State Government shall extend all
facilities to the GN including the provision of vehicles for
holding mobile court.
6. Criminaljurisdiction of GNextends to all offences punishable
with imprisonment for a period lesser than two years; theft,
receiving of stolen property, or assisting in concealment or
disposal of stolen property whose value is less than Rs 20,
o00; insult intending to provoke breach of peace, criminal
intimidation;offences under Minimum Wages Act, Payment
of Wages Act, the Protection of Civil Rights Act, 1955; order
for maintenance of wives, children and parents under Chap
ter IX of the Code of Criminal Procedure, 1973; the Bonded
Labour System (Abolition) Act, 1976; the Equal Remunera
tion Act, 1976; the Protection of Women from Domestic Vio
lence Act, 2005; and their abetments.
7 The civil /urisdiction of CN extends to () Civil Disputes: (4)
right to purchase of property; (b) use of common pasture; ()
regulation and timing of taking water from irrigation chan
nel. (i) Property Disputes: (a) village and farmhouses (Posses
sion); (b) water channels; (c) right to draw water from a well
or tubewell. (ü) Other Disputes:(a) claims under the Payment
of Wages Act, 1936, () claims under the Minimum Wages
Act, 1948 (11 of 1948); (c) money suits either arising from trade
transaction or money lending; (d) disputes arising out of the
partnership in cultivation of land; (e) disputes as to the use
of forest produce by inhabitants of GP.
GNshallerndeavourtosettlethe disputesbyconciliation.Court
proceeding shall be in official language of the State other
than English. Plea-bargaining shall be allowed. Appeals can
lie where the dispute is not resolved by plea-bargaining or
mutual consent or when the fine or financial stake is not less
than Rs 1000. Indian Evidence Act is applicable to the GN
procedure.
The main advantage of GN consists in the policy of justice to the
doorsteps of people, simple and quick procedure and least cost to the