Introduction to ADR

Course Faculty
Ashiv Choudhary
Assistant Professor
 INTRODUCTION TO ADR

ADR & Its Types

Section 89, Civil Procedure Code

1908.

Afcons Infrastructure v. Cherian

Verkey Pvt. Co. Ltd., (2010) 8 SCC
24.
 ADR
"The courts of this country should not be the
places where resolution of disputes begins. They
should be the places where the disputes end
after alternative methods of resolving disputes
have been considered and tried."​
Chief Justice Warren E Burger, 1976​
 INTRODUCTION TO ADR
ADR stands for Alternative Dispute Resolution

Refers to processes/ methods/ machinery capable of providing an alternative to the conventional methods of resolving disputes i.e. adversarial methods.

It includes Arbitration, Mediation, Conciliation, Negotiation, Expert determination, Early Neutral Evaluation by a third person, , Dispute Resolution Board and Lok
Adalat etc.

It is a technique of dispute resolution through the intervention of a third party whose decision may or may not be legally binding on the parties.

Alternative: A substitute to traditional litigating methods/ adversarial system;

• Problems with the adversarial system: Indian courts are clogged with long-pending cases. According to National Judicial Data Grid, 2.84 crore cases are pending in the subordinate courts, the
backlog clogging the High Courts and Supreme Court (SC) is 43 lakh and 57,987 cases, respectively A chronic administrative undercapacity and a perennially under resourced judiciary. Are
responsible for the lack of efficiency of this system. It also imposes exorbitant cost and often has unhappy partici pants.

Dispute: conflicts or disagreements that need resolution.

Resolution: Refers to the process of finding a solution or settling the dispute

 NEGOTIATION

This is the simplest form of ADR.

Parties to a dispute can negotiate a solution themselves.
Completely private and it's fast and cheap.
Where parties to a dispute cannot settle it themselves they may instruct
advocates who will negotiate on their behalf.
Even when negotiation fails at these early stages of a dispute and court
proceedings start, advocates may continue to negotiate on their client's
behalf. This sometimes results in many cases being settled out of court.
 MEDIATION

Where a neutral person (the mediator) helps the parties to reach a compromise.
The job of the mediator is to consult with each party and see how much common ground there is
between them.
They should act as a facilitator, taking offers between the parties.
The mediator doesn't offer an opinion.
Mediation is most suitable where there is some chance that the parties will co-operate.
Mediation is now legally binding on the parties. (The Mediation Act, 2023 – S.27)
Mediation can save a lot of money over going to court.
 MEDIATION

Imagine you're in a group research project with a couple of friends, and there’s a disagreement about who should do which part of the work. You
all agree to bring in a neutral friend (the mediator) to help.

Scenario:

Mediator: "Let’s talk about what each of you wants to achieve with this project and any concerns you have."

You and Friends: You share your perspectives and feelings about the work distribution.

Mediator: Guides the conversation, asks questions to clarify points, and helps everyone understand each other’s viewpoints.

Outcome: You come to a mutually agreed-upon plan for dividing the tasks that everyone is happy with.

In this case, the mediator helps you find a solution, but the agreement is entirely up to you and your friends.
 CONCILIATION

This is similar to mediation

A neutral third party is involved who helps the parties to resolve their
dispute, however, the conciliator plays a more active role in the process.
They will be expected to suggest ways in which a compromise could be
reached,
Conciliation is not legally binding on the parties
 CONCILIATION
Imagine a situation where two roommates are having a dispute about their shared living space. They decide to involve a neutral third party
(the conciliator) to help.

Scenario:

Conciliator: "I see that you both have different views on how to use the common areas. Let’s discuss your needs and concerns."

You and Roommates: Share your points of view on the use of the space and any issues you’re facing.

Conciliator: Proposes a few solutions, like creating a schedule for the use of common areas or setting specific rules for cleanliness.

Outcome: You and your roommates agree to try one of the conciliator’s suggestions and monitor how it works out.

In this case, the conciliator not only helps you discuss your issues but also provides concrete suggestions to resolve the conflict.
 Constitution of India

51. Promotion of international peace and security

The State shall endeavour to--

(a) promote international peace and security;
(b) maintain just and honourable relations between nations;
(c) foster respect for international law and treaty obligations in
the dealings of organised peoples with one another; and
(d) encourage settlement of international disputes by
arbitration.
 Arbitration

‘The process by which parties voluntarily refer their disputes to an impartial third person, an
arbitrator, selected by them for a decision based on the evidence and arguments to be
presented before the arbitration tribunal. The parties agree in advance that the arbitrators
determination, the award, will be accepted as final and binding upon them.’
'Martin Domke'

‘A device whereby the settlement of a question, which is of interest for two or more persons,
is entrusted to one or more other persons – the arbitrator or arbitrators – who derive their
powers from a private agreement, not from the authorities of a State, and who are to
proceed and decide the case on the basis of such an agreement.’​
‘René David’
DISPUTE RESOLUTION
Adversarial (rights)
Consensual (interests) &
confidential

NEGOTIATION MEDIATION ARBITRATION LITIGATION

ADR

● Time and resources

● Party control
 ADR in India: A Historical Timeline
1772: Bengal Regulation of 1772 –
Early efforts by EIC to formalise
and systemazise dispute resolution
mechanism. 2015: Commercial Courts Act;
Before 300 BCE: Traditional Section 12A
dispute resolution through village 1889: Indian Arbitration Act,
councils (Panchayats) based on providing a formal framework for 3 Amendments in Arbitration Act
customs and practices. arbitration. 2021: The Mediation Act
1908: CPC; Section 89

Post-Independence
Medieval Period Developments

Ancient Period Colonial Period Post 21st Century

1950: DPSP – 51(d)

Up to 17th Century: Local disputes
resolved by village headmen and 1985 – Family Courts Act, Section
royal courts under various rulers, 8
including the Mughal Empire. 1987: Legal Services Authorities
Act
1996: The Arbitration and
Conciliation Act, 1996
 History of Arbitration Laws in India

The Arbitration
The Indian
The Arbitration and
Arbitration
Act, 1940 Conciliation
Act, 1899
Act, 1996

2015 Amendment

2019 Amendment

2021 Amendment
 Lok Adalat
Meaning
• Lok Adalat (People's Court) is a forum for resolving disputes through
settlement rather than traditional litigation. It operates as a voluntary process
where parties agree to settle their disputes with the help of a judge or legal
experts. Focuses on conciliatory process.

Legal Services Authorities Act, 1987:

• The Lok Adalat system was established under this Act, which aims to
provide legal aid and promote alternative dispute resolution methods.

Organization:
1. National and State Legal Services Authorities: Oversee the functioning of
Lok Adalats and coordinate the efforts at the national and state levels.
• District Legal Services Authorities: Organize and conduct Lok Adalats at the
district level.
 Lok Adalat

Types of Cases
• Compoundable civil, revenue and criminal cases
• Motor accident compensation claims cases
• Partition Claims
• Damages Cases
• Matrimonial and family disputes
• Mutation of lands case
• Land Pattas cases
• Bonded Labor cases
• Land acquisition disputes
• Bank’s unpaid loan cases
Lok Adalat
 ADR – Pros

1. Cost-Effective
2. Faster Resolution
3. Flexibility
4. Confidentiality
5. Preserves Relationships
6. Control Over Outcome
 ADR – Cons

1. No Appeal
2. Enforcement Issues
3. Potential for Inequality
4. Not Suitable for All Disputes
5. Lack of Formal Discovery
6. Possible Coercion
.
 Section 89 in The Code of
Civil Procedure, 1908
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.
 Section 89 in The Code of
Civil Procedure, 1908
89. Settlement of disputes outside the Court
(2) Where a dispute has been referred-
(a) for arbitration or conciliation, the provisions of the Arbitration and Conciliation Act, 1996 shall apply as if the proceedings
for arbitration or 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 and all other provisions of that Act shall apply in respect of the dispute so 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 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.]
 Procedure To Be Followed u/s 89 CPC

The court is not conferred with the power to read the section in isolation and
needs to be read with Rule 1A, 1B and 1C of Order X of Code Of Civil
Procedure so the procedure that needs to be followed is:
• The court will first record the admissions and denials made by the parties to the dispute.
• As mentioned in the section ('Where it appears to the Court that there exist elements of a
settlement which may be acceptable to the parties') it enables the court to take the next step for
formulating such terms for the settlement which may be passed on to the parties for confirmation.
• The parties may then return the court their observations and if the court is satisfied that a change
in the term is required, it may make such changes by exercising its discretion.
• The option to choose the forum for resolving the dispute is generally given to the parties and the
court just affirms the option chosen by the parties.
 Order 10 in The Code of Civil
Procedure, 1908
[1A. Direction of the Court to opt for any one mode of alternative dispute resolution.

After recording the admissions and denials, the court shall direct the parties to the suit to opt either mode of the settlement outside the court as
specified in sub-section .(1) of section 89. On the option of the parties, the court shall fix the date of appearance before such forum or
authority as may be opted by the parties.

(Added by Act No. 46 of 1999, Section 20 (w.e.f. 1 -7-2002).

1B. Appearance before the conciliatory forum or authority

Where a suit is referred under rule 1 A, the parties shall appear before such forum or authority for conciliation of the suit.

1C. Appearance before the court consequent to the failure of efforts of conciliation

Where a suit is referred under rule 1A and the presiding officer of conciliation forum or authority is satisfied that it would not be proper in the
interest of justice to proceed with the matter further, then, it shall refer the matter again to the Court and direct the parties to appear before the
court on the date fixed by it.]
 Afcons Infrastructure v. Cherian Verkey
Pvt. Co. Ltd., (2010) 8 SCC 24

Facts
• The second respondent (Cochin Port Trust) entrusted the work of construction of certain
bridges and roads to the appellants (Afcons) under an agreement. The appellants sub-
contracted a part of the said work to the (Cherian) first respondent under an agreement.
• Cherian filed a suit against the appellants for recovery of Rs. 210,70,881 from the Afcons.
• During pendency of the suit, Cherian filed a petition under Section 89 of the Code of Civil
Procedure seeking a reference of the dispute to arbitration.
• Afcons contended that there is no arbitration agreement between the parties and that they
are not willing to settle the dispute by arbitration.
• The learned Sub Judge allowed the application and held that as the claim raised in the suit
related to a works contract, it is appropriate that the dispute be settled by arbitration.
• Afcons took up the matter before the High Court of Kerala, which held that the concept of
pre-existing arbitration agreement which is necessary for reference to arbitration under the
provisions of the Arbitration and Conciliation Act, 1996 is not a condition precedent to a
reference to arbitration under Section 89 of the Code and allowed the application.
• Afcons challenged the order before the Apex Court.
Afcons Infrastructure v. Cherian Verkey
Pvt. Co. Ltd., (2010) 8 SCC 24

Issue?

Can a civil court refer a suit to arbitration u/s

89 without consent of all the parties?
 Afcons Infrastructure v. Cherian Verkey Pvt. Co. Ltd., (2010) 8 SCC 24

Held
Who Decides which Process of ADR to be opted?
• The process opted by the party should be chosen by the Court and the Court shall specify an ADR process only if the parties are not able
to reach a consensus.
• It was further held that the court shall not refer any unwilling party to arbitration or conciliation but the Court may, if it thinks fit, refer
the parties to Mediation, Judicial Settlement or Lok Adalat without consent of parties.

Can a civil court refer a suit to arbitration u/s 89 without consent of all the parties?
• Therefore, where there is no pre-existing arbitration agreement between the parties, the consent of all the parties to the suit will be
necessary, for referring the subject matter of the suit to arbitration under Section 89 of the Code.

What is the appropriate stage for considering reference to ADR process?

• Though in civil suits, the appropriate stage for considering reference to ADR processes is after the completion of pleadings.
• In family disputes or matrimonial cases, the position can be slightly different. In those cases, the relationship becomes hostile on
account of the various allegations in the petition against the spouse. The hostility will be further aggravated by the counter-allegations
made by the respondent in his or her written statement or objections. Therefore, as far as Family Courts are concerned, the ideal stage for
mediation will be immediately after service of respondent and before the respondent files objections/written statements.
 Afcons Infrastructure v. Cherian Verkey Pvt. Co. Ltd., (2010) 8 SCC 24

Held

The following categories of cases are normally considered to be not

suitable for
ADR process having regard to their nature:
1. (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).
2. (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.).
3. (iii) Cases involving grant of authority by the court after enquiry, as for example, suits for grant of probate
or letters of administration.
4. (iv) Cases involving serious and specific allegations of fraud, fabrication of documents, forgery,
impersonation, coercion etc.
5. (v) Cases requiring protection of courts, as for example, claims against minors, deities and mentally
challenged and suits for declaration of title against government.
6. (vi) Cases involving prosecution for criminal offences.
 Afcons Infrastructure v. Cherian Verkey Pvt. Co. Ltd., (2010) 8 SCC 24

Held
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;

(ii) 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.
 Afcons Infrastructure v. Cherian Verkey Pvt. Co. Ltd., (2010) 8 SCC 24

Held
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 i i) 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;

(iv) All cases relating to tortious liability including - claims for compensation in motor accidents/other accidents;
and

(v) All consumer dispute

 Afcons Infrastructure v. Cherian Verkey Pvt. Co. Ltd., (2010) 8 SCC 24
Held
• Drafting Error
• After a detailed examination of Section 89 and Order X of the Code of Civil Procedure and the necessity of resorting to Alternate Disputes
Redressal mechanisms [ADR], it held that there is a drafting error in Section 89(2) in so far as the definition of judicial settlement and
mediation has been interchanged and that the Civil Court is bound to conduct a hearing on completion of pleadings to consider whether the
case should be referred to any one of the four ADR processes.
• “In view of the foregoing, it has to be concluded that proper interpretation of Section 89 of the Code requires two changes from a plain and
literal reading of the section. Firstly, it is not necessary for the court, before referring the parties to an ADR process to formulate or re-
formulate the terms of a possible settlement. It is sufficient if the court merely describes the nature of dispute (in a sentence or two) and
makes the reference.
• Secondly, the definitions of 'judicial settlement' and 'mediation' in Clauses (c) and (d) of Section 89(2) shall have to be interchanged to
correct the draftsman's error. Clauses (c) and (d) of Section 89(2) of the Code will read as under when the two terms are interchanged:
• (c) for "mediation", 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 "judicial settlement", the court shall effect a compromise between the parties and shall follow such procedure as may be prescribed.”
 Afcons Infrastructure v. Cherian Verkey Pvt. Co. Ltd., (2010) 8 SCC 24
Held

• Whether the reference to ADR Process is 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 1A of
Order 10 of the Code, the civil court should invariably refer cases to ADR process.
• Only in certain recognized 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 process, 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 case reference to ADR process is a must.”
Afcons Infrastructure v. Cherian Verkey Pvt. Co. Ltd., (2010) 8 SCC 24