ADR Mechanism

Presented by
Dr. Mrs. S. S. Phansalkar – Joshi
Joint Director
Maharashtra Judicial Academy
ADR- Alternate Dispute Resolution

Whether it is really alternate,

Or

additional,

Or

appropriate

Scheme for Resolution of Disputes ?

Why the need for ADR ?
  Mind boggling pendency – Regular Courts
proved to be insufficient to deal with the ever
rising number of the cases,

Resulting in unending delay.

Affecting public confidence.

Litigation becoming costlier.

In the era of fast growing industrialization and

international commercial trade – imminent need
for expedious disposal of disputes.
Decisions of Courts based solely upon capacity
of parties to bring or to prevent evidence being
brought before the Court.

Formal judicial system based, on justice in

accordance with substantive and procedural law, –
no place for equity.

Nominal winner is often a real looser in terms of

fees, expenses and waste of time.

No place for reunion, reconciliation, bridging the

gap between the warring parties and putting an
end to / giving finality to the disputes.
What are the benefits of ADR ?
 It is an informal system of conflict resolution.

Parties can play active role in resolution of

disputes.

It resolves the disputes finally.

It is quick, cheap, flexible and secures privacy.

Avoids delay, tedious and complicated

procedures.
 Better tailored to parties' unique needs.

Solution is problem specific.

Not only addresses the dispute, but also the

emotions underlying the disputes.

Participatory.

Leading to win-win situation.

Which are the Statutory provisions relating to
ADR ?
 Statutory recognition to ADR
Art.51(d) of Constitution - emphasizes on
settlement of international disputes by Arbitration.

Section 89 and Order X Rule 1A of CPC, which

require the Court to refer the disputes for
settlement by way of Arbitration, Conciliation, Lok
Adalat and Mediation.

Order XXVII, Rule 5B CPC – in suits or

proceedings by or against the Govt. or Public
Officer - duty of the Court to assist the parties in
arriving at a settlement.
Order XXXII A Rule 3 CPC - in suit or proceeding
relating to family, duty of the Court to assist the
parties in arriving at a settlement.
 Section 9 of Family Courts Act, 1984 – making
conciliation compulsory, with the help of the
counselors, before proceeding with the trial.

Industrial Disputes Act, 1947- which advises the

parties to resolve the disputes peacefully through
ADR modes.
ADR having roots in India in Panchayat System,

which is also recognized by Constitution as a

best

way of managing the governance of the villages.

 Section 89 and Order X Rule 1A of
CPC

Inserted by Amendment Act 1999 w.e.f. 1-7-2002

It's validity upheld by the Supreme Court in Salem
Advocate Bar Association -Vs.- Union of India
2003 A.I.R. (S.C.) 189

Order X Rule 1A makes it mandatory on the part

of the Court to direct the parties to opt for any of
the mode of settlement outside the Court as
specified in Section 89 (1)
 Section 89 CPC
Where it appears to the Court that there exist

elements of settlement, which may be

acceptable to the parties,

the Court shall formulate the terms of settlement.

Give them to the parties for observations.

After receiving the observations, re-formulate

those terms.
 The Court shall then refer the said terms for

a) arbitration;
b) conciliation;
(as contemplated under the provisions of
Arbitration and Conciliation Act, 1996)

c) judicial settlement, including settlement through

Lok Adalat, in accordance with the provisions of
Sec.20(1) of Legal Services Authority Act

d) for mediation – the Court shall effect a

compromise between the parties as per the
Mediation Rules, 2006.
 Salem Adv. Bar Association v. Union of India
JT 2002(9) SC 175
Salem Adv. Bar Association v. Union of India
JT 2005(6) SC 486

In the first case, the validity of Section 89 was

upheld in view of its laudable object.
In the second case it was held that instead of the
Court formulating and reformulating the terms of
settlement, the Court should only briefly state
about the dispute between the parties, which is
called as 'Summary of dispute' and not 'the terms
of settlement'
 Afcons Infrastructure Ltd. v. Cherian Varkey
Construction Co. JT 2010(7) SC 616

In Section 89(2) the two words appearing in

Clause C and D are required to be interchanged
and then it should read as follows :
C – for mediation to a suitable institution of
person.......
D – for judicial settlement to effect compromise
between the parties as per the procedure to be
prescribed by appropriate rules.
 Arbitration

Arbitration revolves around the agreement

between the parties to get their disputes settled
from a third person.

And

Such settlement has executable legal recognition.

 Arbitration and Conciliation Act 1996 gives wide
ranging powers to the Arbitrators.

Interference of the Court in the Arbitration

proceedings is reduced.

Award given by Arbitrator is having the force of the

decree.

It is final and cannot be challenged, except as

provided in Sec. 34 of the Act.

 Jog Engineering Limited & anr. - Vs.- State of
Maharashtra 2005 (6) LJSOFT (URC) 15 Bom. H.C.

Section 89 of CPC contemplates a consensual

approach that is in those cases where parties
agree to settle the dispute, then only the matter
can be referred to Arbitration. In the absence of
an agreement there is no right to any of the party
to seek a direction to the Court or by way of a Writ
in the nature of mandamus directing Respondents
to refer the matter to arbitration .
 Conciliation

Arbitration and Conciliation Act 1996 gives statutory

recognition to the process of reconciliation.

It is a non-binding procedure in which a neutral

inter-mediatory – the conciliator assists the parties
to arrive at an amicable settlement,

which can be enforced as a decree by virtue of

Sec. 36 of the Act. In conciliation a decision is not
forced on the parties. Hence emotional harmony
between the parties remains.
 Mediation

Mediation is one of the methods by which

conciliation is arrived at.
Arbitrator gives decision.

Conciliators induces the parties themselves to

come to a settlement. He acts merely as facilitator.

Arbitrator is expected to give hearing to the parties

which is not necessary for conciliator.
Mediator is merely a facilitator who persuades the
parties to arrive at an agreement.

He is not an adjudicator.

It is a process formed by interaction between the

parties and mediator.

Even if dispute is not resolved, mediation narrows

down the dispute/differences.
In view of Sec.30, 64(1) and 73(1) of Arbitration
and Conciliation Act 1996,

the conciliator has a greater power in making

proposals for a settlement or formulating and
reformulating the terms of settlement
 Lok Adalats

It provides supplementary forum to the parties for

conciliatory settlement.

Compromises/Settlement arrived at Lok Adalat

has a force of decree.

It attains finality and binds the parties

.
By this process disputes get resolved for once and
all, ensuring mental peace to the parties.
 ADR Rules 2006
After formulating the terms of settlement, the Court
has to give them to parties for their observations
and the parties have to submit their observations
within 30 days.

The Court has to obtain written consent of the

parties before referring the dispute to Arbitration or
to judicial settlement through Lok Adalat.
It is the duty of the Court to give guidance to the
parties in selection of the modes of settlement.

Guidelines for the Court – When there is no

relationship between the parties which requires to
be preserved, then to refer them to Arbitration.

When there is a relationship between the parties,

which requires to be preserved, then to
conciliation or mediation.

Disputes in matrimonial, maintenance and child

custody matters are to be considered as cases
where relationship between the parties has to be
preserved.
Where parties are interested in final settlement

which may lead to a compromise –

then refer them to Lok Adalat.

 When parties agree for settlement by any of the
mode, then they have to apply to the Court within
30 days to refer the matter to Arbitration,
Conciliation, Mediation, or Lok Adalat, as the case
may be.
Then the Court has to refer the matter accordingly.

. In case all the parties do not agree, but where it

appears to the Court that there exist elements of
settlement which may be acceptable to the parties
and there is a relationship between the parties
which has to be preserved, then the Court shall
refer the matter to conciliation or mediation.
 Rule 5A

Nothing in these Rules shall affect the powers of

the Court to refer the parties to ADR by consent of
the parties at any stage of the proceedings.
If the matter is not resolved by any of the mode,

then the Court has to proceed with the matter

according to law.
 Mediation Rules, 2006
It is for the parties to agree upon or decide the
name of Mediator. The Mediator need not
necessarily be from the panel of mediators and
need not have the qualifications referred in Rule 4,
but he should not be a person who suffers from
disqualifications referred in Rule 5.

Each set of parties can nominate a mediator and

such nominees can select the sole mediator and
failing unanimity, the Court shall appoint a Sole
Mediator.
 Rule 11 -Procedure of Mediation

It is for the parties to agree on the procedure to be

followed.

The mediator is not bound by the provisions of

CPC or Evidence Act,

but shall be guided by principles of fairness and

justice, having regard to the rights and obligations
of the parties, usages of trade, if any, and the
nature of the dispute.
 Rule 17

Parties alone are responsible for taking decision.

The mediator cannot impose any decision on the

parties. He only facilitates in arriving at a
decision.
His role is to assist them in identifying issues,
reducing misunderstanding, clarifying priorities,
exploring areas of compromise and generating
options in an attempt to resolve the dispute.
 Rule 18

Time limit for completion of mediation – 60 days

from the date fixed for first appearance.

The Court can extend the further period of 30

days,
upon request by the Mediator or any of the parties
and upon hearing all the parties,

if it is necessary or may be useful.

 Rule 25

On receipt of settlement agreement,

within 7 days, the Court has to issue Notice to the

parties and

record the settlement and

pass a decree in accordance with the settlement.

 Rule 26

The Court shall fix the fee of the mediator, as far

as possible a consolidated sum,

after consulting mediator and parties,

which is to be shared equally by both the parties.

Afcons Infrastructure Ltd. v. Cherian Varker
Construction Co. JT 2010(7) SC 616
Having regard to the tenor of the provisions of
Order X Rule 1A, the Civil Court should
invariably refer cases to ADR process, except in
certain excluded categories of cases.
If the case is unsuited for reference to any of the
ADR processes, the court has to briefly record the
reasons for not resorting to any of the settlement
procedure prescribed u/s. 89.
What is mandatory is to consider recourse to
ADR, though actual recourse to ADR is not
mandatory.
Afcons Infrastructure Ltd. v. Cherian Varker
Construction Co. JT 2010(7) SC 616

Categories of the cases which are excluded from

consideration for reference to ADR are laid down
in this authority.
They are like representative suit, election dispute,
cases involving serious allegations of
fraud,fabrication of documents, etc.
Afcons Infrastructure Ltd. v. Cherian Varker
Construction Co. JT 2010(7) SC 616
Conciliation is a non-adjudicatory ADR
process, which is also governed by the provisions
of AC Act. There can be a valid reference to
conciliation only if both parties to the dispute
agree to have negotiations with the help of third
party or third parties either by an agreement or by
the process of invitation and acceptance provided
in section 62 of AC Act followed by appointment of
conciliator/s as provided in Section 64 of AC Act.
If both parties do not agree for conciliation, there
can be no 'conciliation'.
 Conciliation contd...

As a consequence, as in the case of

arbitration, the court cannot refer the parties to
conciliation under section 89, in the absence of
consent by all parties. As contrasted from
arbitration, when a matter is referred to
conciliation, the matter does not go out of the
stream of court process permanently. If there is no
settlement, the matter is returned to the court for
framing issues and proceeding with the trial.
 Guidelines laid down in Afcons
Infrastructure Ltd.
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 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.
e. 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 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 court 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.
i. 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).
This will be necessary as many settlement
agreements deal with not only the disputes which
are the subject mater of the suit or proceedings 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 unforceable, the court should draw the attention
of parties thereto to avoid further litigations and
disputes about executability.
(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 any 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 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.
v. 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
alternate 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 for 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.
 Difference between various
processes
Arbitration and Conciliation – Consent of both the
parties mandatory. Without consent no reference
can be made.
Once the matter is sent to Arbitration, the Court's
role is over.
Whereas in Conciliation, the matter again comes
back to the Court for final Order.
Arbitration is an adjudication process by Private
Forum.
Conciliation is a settlement process.
 Difference between various
processes

For reference to Mediation, Lok Adalat and

Judicial Settlement – Consent of the parties is not
required. It is the discretion of the Court to make
reference to any of these three processes.
The control of the Court remains over the file even
if reference is made and the file ultimately comes
to the Court for Order in case of mediation and
Judicial Settlement.
 Difference between various
processes
Arbitration and Conciliation – governed by
AC Act, 1996.
Reference to Lok Adalat – governed by Legal
Services Authorities Act, 1987.
Reference to Mediation – governed by Mediation
Rules, 2002.
Judicial Settlement – not governed by any
enactment and the Court is to follow such
procedure as may be prescribed by appropriate
Rules.
 Active case management includes,

Encouraging parties to use of ADR procedure

and facilitating the use of such procedure.

Disputant has a right of self determination of
Forum to get conflict resolved by different
resources.

The approach is
not –
whether this case is suitable for ADR,

but
approach should be

why this case is not suitable ?

 Matter divides - ADR unites.

Through meditation you bring peace to yourself.

Through mediation you bring peace to others.

Coming years would be years of mediation and
conciliation.

And

Not of litigation.
Time has come to consider whether we have failed
the formal system of justice or whether the system
has failed us.

The litigant is, however, not interested in these

things. He wants justice, that too fair, quicker and
cheaper.

Only ADR Mechanism can guarantee that justice to

the litigant.