JAMIA MILLIA ISLAMIA

UNIVERSITY

FACULTY OF LAW
JAMIA MILLIA ISLAMIA UNIVERSITY
NEW DELHI-10025

A DISSERTATION IN PURSUANCE OF THE REQUIREMENTS UNDER THE DEGREE OF

BACHELOR OF LAW
ON
“ALTERNATIVE DISPUTE RESOLUTION MECHANISM IN INDIA”

SUBMITTED IN THE FULFIlLMENT OF FINAL SUBMISSION TO BE MADE UNDER

CLINICAL COURSE-I

Submitted by:

DILWAR HUSSAIN

B.A. L.L.B(H) [VII SEM]

SECTION B

CLASS ROLL NO.10

Under the Supervision of:

MS. MADHU SAINI

ASSISTANT PROFESSOR

FACULTY OF LAW

1
LIST OF CONTENTS:

I.CERTIFICATE……………………………………………………………………………..5

II.ACKNOWLEDGEMENT…………………………………………………………………6

III. TABLE OF CASES………….......………………………………………………………7

IV. CHAPTER 1- CONCEPT OF ADR………………………………………………...10-16

1.1 An Introduction to ADR

1.2 History of ADR
1.2.1 Position of ADR in Ancient India
1.2.2 ADR during British Period
1.2.3 ADR Post Independence
1.3 To Sumup
V. CHAPTER 2- MODES OF ADR…………………………………………………….17-22
2.1 Arbitration
2.2 Why do parties use ADR
2.3 Can ADR be kept secret?

2.4 Negotiation

2.5 Facilitation
2.6 Mediation
2.7 Lok Adalat
VI. CHAPTER 3- CHALLENGES IN INTRODUCING ADR SYSTEMS IN INDIA..23-35
3.1 A Brief Overview
3.1.1 Legislative Problem
3.1.2 Intervention of Courts
3.1.3 Cultural norms
3.1.4 Adequate Human Resources
3.1.5 Financial Resources
3.1.6 Lack of Adequate Political Support
3.2 Conclusion
2
VII. CHAPTER 4- ANALYSIS OF THE ARBITRATION AND CONCILIATION
(AMENDMENT) ACT, 2015…………………………………………………………..36-51
4.1 Analysis of the judgement AFCONS
4.2 Principle of Kompetenz-Kompetenz
4.3 Model Civil Procedure ADR rules 1996
4.3.1 Domestic Arbitration
4.3.2 Limited Judicial Intervention
4.3.3 Arbitration Agreement

VIII. CHAPTER 5- ARBITRAL TRIBUNAL…………………………………………52-58

5.1 Jurisdiction
5.2 Conduct of Arbitral proceedings
5.3 Arbitral Award
5.4 Recourse against arbitral award
5.5 Finality and Enforcement of Awards
5.6 International Commercial Arbitration and Foreign Awards

IX. CHAPTER 6- MEDIATION……………………………………………………….59-63

6.1 Introduction
6.2 Pre Mediation preparation
6.3 De meanor of the mediation
6.4 Mediation Techniques

X. CHAPTER 7- RULES OF MEDIATION…………………………………………...64-79

7.1 Model Civil procedure Mediation Rule 2003
7.2 Stages of Mediation
7.3 Approaches to Negotiation
7.4 Lok Adalats and permanent lok adalats
7.5 Stage of Use

3
XI. CHAPTER-8 UNDERSTANDING CONFLICTS…………………………………...80-82
8.1 Base and Grounding of Conflict
8.2 Process of development of Conflict
8.3 Model to understand conflict
8.4 Ranking Model
XII. CHAPTER-9 STAGES OF MEDIATION…………………………………………..83-108
9.1 Mediation Process and Role of Mediation

XIII. CHAPTER- 10 ALTERNATIVES OF NEGOTIATED AGREEMENT…………..109-110

XIV. CHAPTER- 11 MEDIATION, ARBITRATION, CONCILIATION, LOK
ADALAT……………………………………………………………………………….....111-118
11.1 Comparison of Mediation and Arbitration
11.2 Comparison of Mediation and Conciliation
11.3 Comparison of Mediation and Lok Adalat

XV. CHAPTER- 12 INTERPRETATION OF ALTERNATIVE DISPUTE RESOLUTION BY

INDIAN COURTS………………………………………………………………………..119-121
XVI. CHAPTER- 13 LOK ADALATS AS A UNIQUE MEASURE IN INDIA………...122-125
XVII. CHAPTER – 14 ARBITRATION AND CONCILIATION ACT 1996 AND SECTION
89…………………………………………………………………………………………..126-130
14.1 No compulsion under Section 89
14.2 Applicability of Lok Adalat Act
14.3 238th Law Commission Report

XVIII. CHAPTER- 15 CONCLUSION……………………………………………………….131

XIX. CHAPTER- 16 BIBLIOGRAPHY………………………………………………….132-136

4
CERTIFICATE

I have the pleasure to certify that DILWAR HUSSAIN, a student of FACULTY OF LAW,
JAMIA MILLIA ISLAMIA has pursued his research work and prepared the present dissertation
entitled “ALTERNATE DISPUTE REDERESSAL MECHANISM IN INDIA.

To the best of my knowledge, the dissertation is the result of his research.

This is being submitted to Faculty of Law, Jamia Millia Islamia in the fulfilment of final
submission of Course work under Clinical Course-I in pursuance of requirements under the 5-yr
degree of Bachelor of Law.

Prof. Dr Nuzhat Parveen Khan Ms. Madhu Saini

DEAN Assistant Professor
Faculty of Law, Faculty of Law,
Jamia Millia Islamia. Jamia Millia Islamia.
New Delhi- 110025, New Delhi-110025,
Delhi. Delhi.

5
ACKNOWLEDGEMENT

This Dissertation is an outcome of study by the author. Any material written by another person
that has been used in this paper has been thoroughly acknowledged.

As my research for this dissertation has concluded, there are a number of people I would like to
thank for this successful attempt.

I thank the esteemed Dean of the Institution, Dr. Prof. Nuzhat Parveen Khan for inculcating the
concept of preparing a Dissertation under the Clinical Course-I and allowing me to present my
viewpoints in a liberal manner. In addition to this, I would like to show my heart-felt gratitude to
Ms. Madhu Saini, who undertook the role of a supervisor, mentor and guide for the successful
preparation of this Dissertation.

On a personal level, I would like to extend appreciation towards my family and friends who
supported me throughout.

DILWAR HUSSAIN
B.A.L.L.B(H) [VII SEM]

6
TABLE OF CASES

 State of Rajasthan v Puri Construction Co Ltd (1994) 6 SCC 485

 State of UP v Allied Constructions (2003) 7 SCC 396.
 Dorstener Maschine (Germany) v. Sand Plast India AIR 1995 Arb.LR 282(Del)
 Harendra H. Mehta v. Mukesh H. Mehta AIR 1999 SC 2054
 Dominant Offset Pvt. Ltd. v. Adamouske Strojirny AS 68 (1997) DLT 157
 Olex Focas Pvt. Ltd. Vs. Skoda export Company Ltd AIR 2000 Delhi 161
 East Coast Shipping v. MJ Scrap
 Marriott International Inc v. Ansal Hotels Ltd AIR 2000 Delhi 337
 Kitechnology N.V. v. Union Gmbh Plastmaschinen 1999 (48) DRJ 316
 Oil and Natural Gas Corp v Saw Pipes Ltd. 2003 (5) SCC 705 (‘Saw Pipes’)
 Renu Sagar Power Co v General Electrical Corp 1994 Supp (1) SCC 644
 McDermott International Inc v Burn Standard Co Ltd, 2006 (11) SCC 181 at 208.
 Indian Oil Corp Ltd v Langkawi Shipping Ltd 2004 (3) Arb LR 568.
 Union of India v Tecco Trichy Engineers & Contractors 2005 (4) SCC 239
 M Anasuya Devi v Manik Reddy 2003 (8) SCC 565.
 Thyssen Sthlunion GMBH v. Steel Authority of India AIR 1999 SC 3923
 Serajuddin v. Michael Golodetz AIR 1960 Cal.49
 N.T.P.C. v. Singer Co AIR 1993 SC 998
 R.M. Investment and Trading Co. (P) Ltd. v. Boeing Co., (1999) 5 SCC 108.
 Bhatia International v. Bulk Trading S.A. AIR 2002 SC 1432
 Orient Paper Mills v. Civil Judge AIR 2003 (4) RAJ 479(Ori)
 Union of India v. Popular Builders AIR 2000 SC 1
 U.P.Rajkiya Nirman Nigam Ltd. v. Indure(P) Ltd. AIR 1996 (2) SC 667
 Union of India v. G.S. Atwal &Co AIR 1996 (3) SC 568
 Centrotrade Mineral & Metals Inc v. Hindustan Copper Ltd AIR 2006(11) SCC 245
 Chromalloy Aeroservices Inc. v. Arab Republic of Egypt, 939 F Supp. 907, at 909
(D.D.C. 1996).
 Open Sea Maritime Inc. v. R. Pyarelal International Pvt. Ltd. AIR 1999(2) Arb. LR
383(Bom.)
 Phulchand Exports Ltd. v. OOO Patriot AIR 2011(4) Arb.LR 108(SC)
7
 Transoccan Shipping Agency v. Black Sea Shipping AIR 1998(2) SCC 281
 Ludwing Wunscha & Co. v. Raunaq International AIR 1983 Del. 247
 Venture Global Eng. v. Satyam Computer Services AIR 2008 SC 1061
 Koch Navigation Inc. v. M/s. H.P.C.L AIR 1989 SC 2198
 Fuerst Day Lawson v. Jindal Export Ltd AIR 2001 SC 2293
 M/s Kochi Navigation Co. v. M/s Hindustan Petroleum Corporation Ltd. AIR 1989 SC
2198
 State of West Bengal v. M/s Gourangalal Chatterjee AIR 1993(3) SC 1
 Vanita Khanolkar v. Pragna M. Pai AIR 1198 SC 424
 Orma Impex Pvt. Ltd v. M/s Nissai Asb Pvt. Ltd. AIR 1999SC2871
 M/s. I.T.I. Ltd. v. Siemers Public Communications Network Ltd. AIR 2002 SC 2308
 Sumitomo Corporation v. CDC Financial Services(Mauritius) Ltd.& Others AIR 2008 SC
1594
 Rudolf A Oetkar Vs Mohammed Ori 1999 SCC Online Cal
 Compania Naviera Vs Bharat Refineries Limited AIR2007 Mad 251

 Noy Vallesina Engnieering SPA Vs Jindal drugs Limited

 Minmetals Germany GmbH v Ferco Steel Ltd, [1999] 1 All E.R. (Comm) 315 (QBD
(Comm Ct)) A.AbdulJalees v. T.A.Sahida (2003) 4 SCC 166
 Addhar Mercantile Private Limited v. Shree Jagdamba Agrico Exports Private Limited
Appeal no. 197
 Adhunik Steels Ltd. v Orissa Manganese and Mineral Pvt. Ltd., (2007) 7 SCC 125
 Afcons Infrastructure Ltd. v. Cherian Varkey Consturction Co. (P) Ltd (2010) 8 SCC 24
 Ardy International (P) Ltd. v. Inspiration Clothes and U, (2006) 1 SCC 417.
 Ashalata S. Lahoti v. Hirala Lilladhar 1993 (3) Arb. LR.462 (Bombay)
 Atiabari Tea Co. Ltd v State of Assam (1961) 1 SCR 809
 Baba Ali, Petitioner v. Union of India and Others 1999 (Suppl.) Arb. LR 433 (SC)
 Bawa Masala Co. v. Bawa Masala Co. Pvt. Ltd, AIR 2007 Delhi 284
 Bharat Aluminum Co. v. Kaiser Aluminum Technical Services Inc., (2012) 9 SCC 552
 Bhatia International v. Bulk Trading S.A., AIR 2002 SC 1432
 BOC India Ltd v. Instant Sales Pvt Ltd, AIR 2007 Cal 275 at 276
 Bonytbon v. Common wealth, [1951] AC 210 at 219.
 Brij Mohan Lal vs. Union of India & Others (2002) 4 Scale 433
8
 Chief Conservator of Forests v. Collector, (2003) 3 SCC 472
 Chloro Controls India (P) Ltd. v. Severn Trent Water Purification Inc., (2013) 1 SCC 641
 Deutsche Post Bank Home Finance Ltd v. Taduri Sridhar 1999(2) Arb. LR 695 (SC)
 Dolphin Drilling Ltd. v. M/s. Oil and Natural Gas Corporation Ltd. 2001 (1) Arb. LR. 87
(Bombay)
 Dosco v. Doozan 517 F. Supp. 948
 Electrosteel Casting Limited v. Reacon Engineers (India) Private Limited (2002) 4 SCC
105
 Fertilizer Corp of India v. IDI Management Inc., 517 F. Supp. 948 (SD of Ohio 1981)
 Food Corporation of India v. Indian Council of Arbitration, (2003) 6 SCC 564,
 Food Corporation of India v. Jogindarial Mohindarpal AIR 1999 SC 2102

9
CHAPTER 1 – CONCEPT OF ADR

1.1 AN INTRODUCTION TO ADR

Dispute resolution outside of courts is not new; societies world-over have long used non-judicial,
indigenous methods to resolve conflicts. What is new is the extensive promotion and
proliferation of ADR models, wider use of court-connected ADR, and the increasing use of ADR
as a tool to realize goals broader than the settlement of specific disputes.1

ADR refers to a spectrum of negotiation-based conflict resolution processes in which

representatives of the parties to a current or potential dispute meet together for collaborative
problem solving and consensus building, with the goal of achieving a mutually acceptable
resolution. In al1 ADR processes, the participation of the parties should be completely voluntary,
including their ability to withdraw from the process at any time. No Party, not even a facilitator
or mediator, should compel another to participate; although persuasion can play an important
role in securing the participation of relevant stakeholders. Parties engage in the process without
prejudice to their legal rights or any subsequent conflict resolution process. In other words, by
entering an ADR process, disputants do not surrender their right to pursue the conventional
conflict resolution channel that they would otherwise have entered into. Nor do the ADR
proceedings have any legal influence on the conventional process. Although in practice
subsequent processes may be affected by the parties' greater knowledge of each other's interests
and positions, parties cannot legally be held to what they said during the ADR process. No part
of an agreement is final until every party deems the entire agreement acceptable. Although it is
possible for agreements to not be legally binding on the parties. in practice parties are seldom
willing to invest their time and resources in ADR unless it is agreed from the outset that any
agreement reached will be signed and will legally bind the signatories. Finally, the settlement of
issues in ADR is based on a consensus of dl of the parties, rather than a majority vote.

Mediation, arbitration, and ADR (‘alternative dispute resolution’) are processes used to resolve
disputes, either within or outside the formal legal system, without adjudication or decision by a
judge. More recently, the terms ‘appropriate dispute resolution’ and ‘process pluralism” have
been used to express the idea that different kinds of disputes, variable by subject matter type,
parties involved, or location of the dispute or transaction, may require different kinds of
1
Alternative Dispute Resolution, Practitioners’ Guide, Centre for Democracy and Governance, Washington, 1998
10
processes—no one legal or informal dispute process can serve for all human disputing.
Mediation is a process in which a third party (usually neutral and unbiased) facilitates a
negotiated consensual agreement among parties, without rendering a formal decision. In
arbitration, a single third party or a panel of arbitrators, most often chosen by the parties
themselves, renders a decision, in terms less formal than a court, but often with a written award.
ADR includes a variety of hybrid processes built on the basic processes of negotiation, mediation
and arbitration, now including med-arb, minitrials, summary jury, or judge trials and early
neutral evaluation, which vary in providing opportunities for settlement of cases, advisory
opinions, or decisions in both public (court-annexed) and private settings. This article defines the
basic ADR terms and reviews the theory, history, controversies, and future of alternative dispute
resolution processes. As noted below, the full panoply of processes denominated under the rubric
of ADR now includes a variety of primary and hybrid processes, with elements of dyadic
negotiation, facilitative, advisory and decisional action by a wide variety of third party neutrals,
sometimes combined with each other to create new formats of dispute processing.2

1.2 HISTORY OF ADR IN INDIA

1.2.1 POSITION OF ADR IN ANCIENT INDIA

It is generally presumed that the commonly prevalent system of Government in Ancient India
was monarchy and instances of republic were either exceptions or aberrations. The view is based
on the apparent perception that since there were kings in ancient India, the system was that of
monarchy.3

In the beginning of the Vedic age people did not have a settled life and were nomads but with
development in agriculture people started to settle down in groups. 4 The first Indian civilization
arose in the Indus valley about 2,600 BC. It actually straddled modern India and Pakistan. By
6,500 BC the people of the area had begun farming. By 5,500 BC they had invented pottery. By
about 2,600 BC a prosperous farming society had grown up. The farmers used bronze tools.
They grew wheat, barley and peas. They also raised cattle, goats and sheep. Water buffalo were
used to pull carts. The people spun cotton and they traded with other cultures such as modern day
2
See Negotiation and Bargaining: Role of Lawyers; International Arbitration; Litigation; Courts and Adjudication;
Disputes, Social Construction and Transformation of; Legal Systems: Private; Lex Mercatoria; Legal Pluralism;
Lawyers; Judges; Para-lawyers: Other Legal Occupations.
3
http://www.samarthbharat.com/files/republic.pdf
4
http://www.culturalindia.net/indian-history/ancient-india/ancient-government.html
11
Iraq. Some of the people of the Indus Valley began to live in towns.5 The Indus Valley people
were most likely Dravidians, who may have been pushed down into south India when the
Aryans, with their more advanced military technology, commenced their migrations to India
around 2,000 BCE. Though the Indus Valley script remains undeciphered down to the present
day, the numerous seals discovered during the excavations, as well as statuary and pottery, not to
mention the ruins of numerous Indus Valley cities, have enabled scholars to construct a
reasonably plausible account of the Indus Valley civilization. 5 Harappans may have developed
the first democracy. Very little evidence has been found of a king in the Indus Valley, except the
one white priest-king idol and a silver crown; not enough to establish that the “royalty” were the
rulers. Instead the empire was divided into regions with half a dozen cities functioning as capitals
and was governed by a group of people. Archeologist Jonathan Mark Kenoyed has speculated
that the Harappan rulers were merchants, ritual specialists and individuals controlling important
resources, instead of just one social group controlling the rest. From the construction of the cities
however it does appear there were some social classes, as the citadel is usually 20 feet higher
than the middle and lower town.6 The decline of the Indus Valley civilization saw the arrival of
Aryans in India. From their original settlements in the Punjab region, they gradually began to
penetrate eastward, clearing dense forests and establishing “tribal” settlements along the Ganga
and Yamuna plains between 1500 B.C. and 800 B.C. By around 500 B.C., most of northern India
was inhabited and had been brought under cultivation, facilitating the increasing knowledge of
the use of iron implements, including ox-drawn plows, and spurred by the growing population
that provided voluntary and forced labour. As riverine and inland trade flourished, many towns
along the Ganga became centres of trade, culture and luxurious living. Increasing population and
surplus production provided the basis for the emergence of independent states with fluid
territorial boundaries over which disputes frequently arose.7

In ancient India there were several grades of arbitration, for example the Puga or a board of
persons who belonged to different sects and tribes but lived in the same locality; the Sreni or
assemblies of tradesmen and artisans belonging to different tribes but connected in some way
with each other, the Kula or groups of persons bound by family ties. From early times, the
decisions of Panchayats were accepted as binding. According to Colebrooke (an English scholar
and commentator on ancient Hindu law), Panchayats were different systems of arbitration

5
http://www.sscnet.ucla.edu/southasia/History/Ancient/Indus2.html
6
http://www.hyperhistory.net/apwh/essays/comp/cw02summeriansharappans34100118.htm
7
http://www.thisismyindia.com/ancient_india/ancient-india-government.html
12
subordinate to the regular courts of law. The decision of a Kula or kin group was subject to
revision by the Sreni which, in turn, Pradvivaca and finally to the sovereign and the prince. In
ancient times the Kula, sreni and Gana were the three types of popular courts, each succeeding
one being more important than the preceding one. When and where these three failed to
administer proper justice, the king or his officers were to interfere. Unfortunately Sukra does not
explain the nature of the above three types of courts. But on the evidence of the Mitakshara, it
can say that kula court consisted of a group of relations near or distant. It is important to note that
in ancient India joint families were the order of the day and they were usually very large. When
therefore, a disagreement or dispute used to take place between two members of a family, it was
usually settled by its elders. If they failed to bring about any compromise, the sreni or the guild
courts used to intervene. Srenis or guilds became a prominent feature of commercial life in
ancient India from 500 B.C. They were well organized and had their own executive committees
of four or five members. The nature of the Gana Court is difficult to ascertain. Probably it was
identical with the Puga Court of Yajnavalkya, which consisted of persons of different castes and
professions but residing in the same place. It was obviously the popular panchayat courts.8

1.2.2 ALTERNATIVE DISPUTE RESOLUTION DURING BRITISH PERIOD

The British East India Company opened their first trading centre at Surat, Gujarat in 1612. This
was as per the deed of right Mughal Emperor Jehangir granted to them. Their first major
interference with the internal politics of India was when they supported Mir Kasim, a minister of
Bengal, militarily to sabotage Siraj-ud-Daula, the Nawab. On 23rd June, 1757, the Nawab was
defeated by a joint military action of Robert Clive’s troops and those of Mir Kasim in a battle at
Plassey. And this was the turning point where the British formally entered the political arena of
India and began to play a direct role in the administrative supremacy. They managed to bring
under their administrative control most of the princely states of India either by direct annexation
using force or by giving military support. They brought Punjab also under their control in 1849.
Along with Punjab, the North West Frontier Province, which is now under Pakistan, was also
brought under them. And in those states where a legitimate heir apparent to the crown was not
available they were brought under the British rule. Sattara (1848), Udaypur (1852), Jhansi
(1853), Tanjore (1853), Nagpur (1854), Oudh (1856) were some of the princely states the British

8
P.B. Udgaonkar, Political Institutions and Administration, Motilal Banarsidass Publishers Pvt. Ltd., New Delhi,
1986, p. 209
13
annexed using this excuse – that there were no legitimate heir apparent. When Tipu was defeated
in 1792, they annexed Malabar too.9

Judicial administration was changed during British period. The current judicial system of India is
very close to the judicial administration as prevailed during British period. The traditional
institutions worked as recognised system of administration of justice and not merely alternatives
to the formal justice system established by the British. The two systems continued to operate
parallel to each other.10 The system of alternate dispute redressal was found not only as a
convenient procedure but was also seen as a politically safe and significant in the days of British
Raj.

However, with the advent of the British Raj these traditional institutions of dispute resolution
somehow started withering and the formal legal system introduced by the British began to rule. 11
Alternate Dispute Resolution in the present form picked up pace in the country, with the coming
of the East India Company. Modern arbitration law in India was created by the Bengal
Regulations. The Bengal Regulations of 1772, 1780 and 1781 were designed to encourage
arbitration.12 Bengal Resolution Act, 1772 and Bengal Regulation Act, 1781 provided parties to
submit the dispute to the arbitrator, appointed after mutual agreement and whose verdict shall be
binding on both the parties. Hence, there were several Regulations and legislation that were
brought in resulting considerable changes from 1772. After several Regulations containing
provisions relating to arbitration Act VIII of 1857 codified the procedure of Civil Courts except
those established by the Royal Charter, which contained Sections 312 to 325 dealing with
arbitration in suits. Sections 326 and 327 provided for arbitration without the intervention of the
court.

After some other provisions from time to time Indian Arbitration Act,1899 was passed, based on
the English Arbitration Act of 1889. It was the first substantive law on the subject of arbitration
but its application was limited to the Presidency – towns of Calcutta, Bombay and Madras. Act,
however suffered from many defects and was subjected to severe judicial criticisms. In 1908 the
Code of Civil Procedure was re-enacted. The Code made no substantial changes in the law of

9
http://www.indiavideo.org/text/british-colonization-335.php
10
Sarvesh Chandra, ADR: Is Conciliation the Best Choice, in P.C. Rao and William Sheffield (eds.), Alternative
Dispute Resolution: What it is and How it Works, Universal Law Publishing Co., New Delhi, (1997) p. 85.
11
K. Jayachandra Reddy, Alternate Dispute Resolution, in P.C. Rao and William Sheffield (eds.), Alternative
Dispute Resolution: What it is and How it Works, Universal Law Publishing Co., New Delhi, (1997) p. 79.
12
Nripendra Nath Sircar, Law of Arbitration in British India (1942), p. 6 cited in 76’th Report of Law Commission
of India, 1978, p. 6, para 1.14
14
arbitration. The Arbitration Act of 1940 was enacted replacing the Indian Arbitration Act of
1899 and section 89 and clauses (a) to (f) of section 104(1) and the Second Schedule of the Code
of Civil procedure 1908. It amended and consolidated the law relating to arbitration in British
India and remained a comprehensive law on Arbitration even in the Republican India until 1996.

1.2.3 ALTERNATIVE DISPUTE RESOLUTION POST INDEPENDENCE

Bodies such as the panchayat, a group of elders and influential persons in a village deciding the
dispute between villagers are not uncommon even today. The panchayat has, in the recent past,
also been involved in caste disputes.13 In 1982 settlement of disputes out of courts started
through Lok Adalats. The first Lok Adalat was held on March 14, 1982 at Junagarh in Gujarat
and now it has been extended through out the country. Initially, Lok Adalats functioned as a
voluntary and conciliatory agency without any statutory backing for its decisions. By the
enactment of the Legal Services Authorities Act, 1987, which came into force from November 9,
1995, the institution of Lok Adalats received statutory status. To keep pace with the globalization
of commerce the old Arbitration Act of 1940 is replaced by the new Arbitration and Conciliation
Act, 1996. Settlement of matters concerning the family has been provided under Order XXXIIA
of the Code of Civil Procedure, 1908 by amendment in 1976. Provisions for making efforts for
reconciliation under Sections 23 (2) and 23 (3) of the Hindu Marriage Act, 1955 as also under
Section 34 (3) of the Special Marriage Act, 1954 are made. Family Courts Act was enacted in
1984. Under Family Courts Act, 1984 it is the duty of family court to make efforts for settlement
between the parties. Introduction of section 89 and Order X Rule 1A, 1B and 1C by way of the
1999 Amendment in the Code of Civil Procedure, 1908 is a radical advancement made by the
Indian Legislature in embracing the system of “Court Referred Alternative Disputes Resolution”.

1.3 TO SUM UP

13
http://www.nishithdesai.com/Research-Papers/adr.pdf
15
India has a long history of settlement of disputes outside the formal justice delivery system. The
concept of parties settling their disputes by reference to a person or persons of their choice or
private tribunals was well known to ancient India. Long before the king came to adjudicate on
disputes between persons such disputes were quite peacefully decided by the intervention of the
kulas, srenis, pugas and such other autonomous bodies. 14 These traditional institutions worked as
main means of dispute resolution, not an alternative. During the British rule the system of
dispute resolution was changed and a new formal, adversary system of dispute resolution
originated. Arbitration was recognised as out of court method of dispute resolution and several
provisions were enacted relating to that. The ADR system as is understood in the present
scenario is the result of the shortcomings of that formal judicial system. Now the alternative
disputes resolution techniques are being used to avoid the costs, delays and cumbersome
procedure of the formal courts.

CHAPTER 2 MODES OF ADR

P.C. Rao, Alternatives to Litigation in India, in P.C. Rao and William Sheffield (eds.), Alternative Dispute
14

Resolution: What it is and How it Works, Universal Law Publishing Co., New Delhi, (1997) p. 27.
16
2.1 ARBITRATION

Arbitration is adjudication over disputes between parties by a neutral person who has been
agreed upon by the parties to be the arbiter and decide upon the matter. The parties are permitted
to agree upon the procedure to be followed for such arbitration. In India, the law governing
arbitration is the Arbitration and Conciliation Act, 1996 based upon the UNCITRAL Model Law
on Arbitration of the year 1985.

In the past, statutory provisions on arbitration were contained in three different enactments-

 The Arbitration Act, 1940,

 The Arbitration (Protocol and Convention) Act, 1937 and
 The Foreign Awards (Recognition and Enforcement) Act, 1961.

The Arbitration Act, 1940 laid down the framework within which domestic arbitration was
conducted in India, while the other two Acts dealt with foreign awards. The Arbitration and
Conciliation Act 1996 has repealed the Arbitration Act, 1940 and also the Acts of 1937 and
1961, consolidated and amended the law relating to domestic arbitration, international
commercial arbitration and enforcement of foreign arbitral awards and also defined the law
relating to conciliation.

The Arbitration Act of 1996 contains mainly three parts. Part I deals with domestic arbitrations,
Part II deals with international commercial arbitrations and Part III deals with provisions as to
conciliation. The Act does not define arbitration as such. It merely says that arbitration means
any arbitration whether or not administered by a permanent arbitral institution 15. This means that
arbitration may be ad hoc16 or institutional.

15
Section 2(a) of the Arbitration and Conciliation Act, 1996.
16
An ad hoc arbitration is arbitration agreed to and arranged by the parties themselves without recourse
to any institution. The proceedings are conducted and the procedures are adopted by the arbitrators as
per the agreement or, with the concurrence of the parties. It can be a domestic27, international27 or
foreign arbitration27. In case of disagreement on the appointment of an arbitrator under ad hoc
arbitration cases, Section 11 0f the Arbitration and Conciliation Act’1996 empowers the Chief Justice
of High Court or Chief Justice of India, as the case may be, to appoint the arbitrators. The Chief Justice
is also empowered to designate any person or institution to take the necessary steps for the appointment
of arbitrators. A scheme made by the Chief justice may designate a person by name or ex-officio or an
institution, which is specializing in the field of arbitration. The new provision has really given
recognition to the role of arbitral institutions in India
17
Institutional arbitration is arbitration conducted under the rules laid down by an established
arbitration organization17. Such rules are meant to supplement provisions of Arbitration Act in
matters of procedure and other details the Act permit. They may provide for domestic arbitration
or international arbitration or for both, and the disputes dealt with may be general or specific in
character. In order to facilitate the conduct of the arbitral proceedings, it is provided that the
parties or the arbitral tribunal, with the consent of the parties may arrange for administrative
assistance by a suitable institution18 and expressly facilitates the adoption of institutional rules19.

Other kinds of arbitration are specialized arbitration, statutory arbitration, Compulsory

arbitration by Government and permanent Machinery of arbitrators20.

2.2 WHY DO PARTIES USE ADR?

The primary motivations for ADR are to save money and control risk. Preparing for trial is
extremely expensive, and parties can save money if they can resolve the case without having to
incur the expense of trial preparation. Also, when parties settle cases, they have some control
over the outcome of the case in that they can negotiate for terms of the settlement. If a lawsuit
goes to trial, the outcome of the case is left entirely in the hands of the judge or jury. Parties
cannot control the risk of losing at trial. ADR gives parties a chance to control that risk.

In some cases, privacy or confidentiality may be a factor. Most litigants think of ADR as private,
and thus, if they seek secrecy, they may be motivated to try ADR. However, in many cases,

17
For example, International Centre for Alternate Dispute Resolution (ICADR), New Delhi.
18
Section 6 of the Arbitration and Conciliation Act, 1996
19
Section 2(8) ibid.
20
Specialised arbitration is arbitration conducted under the auspices of arbitral institutions, which have
framed special rules to meet the specific requirements for the conduct of the arbitration in respect of disputes of
particular types including disputes as to commodities, maritime, construction, specific areas
of technology etc.
Statutory arbitrations are arbitrations conducted in accordance with the provisions of certain special
Acts, which specifically provide for arbitration in respect of disputes arising from matters covered by
those Acts. The provisions of 1996 Act generally apply to those arbitrations unless they are
inconsistent with the particular provision of those Acts, in which case the provisions of those Acts are
applicable.
Government contracts generally provide for compulsory arbitration in respect of disputes arising there
under and usually the arbitrators appointed to decide such disputes are senior government officers. A
standing committee consisting of senior officers is constituted to ensure no litigation involving such
dispute is taken up in a court or tribunal without the matter having been first examined by the said
committee and the committees clearance for litigation has to be obtained. This procedure has helped in
the settlement of a large number of disputes in an amicable manner, which would have otherwise ended
up in litigation.
Permanent machinery of arbitrators has been set up in Department of Public Enterprises for resolving
commercial disputes except taxation between Public Sector Enterprises inter-se as well as between a
public sector enterprise and a Central Government Department or Ministry.
18
confidentiality is not a major concern. Nevertheless, lawyers put confidentiality clauses into
settlement agreements as a matter of habit, even if confidentiality was not specifically
negotiated. Thus, settlements are usually secret merely by virtue of routine.

It should also be noted that, in the last decade or so, courts have developed rules
that require parties to try ADR, usually mediation, before trial. Mandatory ADR has become
popular because it helps unclog the court system and because most cases can settle once the
parties have undertaken discovery and understand what evidence exists. Most experienced
litigation lawyers can fairly assess whether they can win a case and how much the case is worth,
although they know that anything could happen at trial, and they would prefer to settle for a fair
amount than risk a terrible verdict. But court-ordered conferences raise the issue of whether
those conferences should be deemed public hearings, especially when they are run by a court
magistrate.

In 1998, Congress passed the Alternative Dispute Resolution Act which orders federal courts to
use ADR as a means of unburdening the federal court caseload. Each district court is required to
promulgate rules that "require that litigants in all civil cases consider the use of an alternative
dispute resolution process at an appropriate stage in the litigation." In most jurisdictions, parties
are required to attend a settlement conference at least once prior to trial. The statute also
mandates that "each district court shall . . . provide for the confidentiality of the alternative
dispute resolution processes and to prohibit disclosure of confidential dispute resolution
communications." The statute does not describe how the courts should accommodate First
Amendment concerns.

2.3 CAN ADR BE KEPT SECRET?

Success in challenging the secrecy of ADR will depend on a few factors:

1. Whether you are seeking access to the ADR proceeding itself or only to documents;

2. What type of ADR proceeding it is;

3. Whether documents were ever filed with, presented to or enforced by a court, and;

4. Whether the litigants are private or public entities.

If you seek access to the ADR proceeding itself, it probably will not be granted. Most courts
believe that ADR works only if the parties feel free to say whatever they want without fear of it

19
being reported or used against them later. In fact, there is a rule of evidence in every jurisdiction
that prevents parties from using confidential statements made in ADR proceedings from being
used as evidence later. This policy was developed to encourage honesty during ADR. Following
this belief, courts have ruled that there is no right of access to summary jury trials or settlement
proceedings.21

If you seek access only to settlement documents, then you may have a better chance of obtaining
access. The primary factors will be whether those documents were ever filed with, presented to
or enforced by a court and whether the litigants are private or public entities.

If a settlement agreement was made in private between two private parties and was never
submitted to a court for any reason, then the chances of obtaining access are minimal. Under
those circumstances, the settlement agreement is not a "court record" because it was never in the
court's possession. The court does not have an agreement to provide to the public, and it would
have no reason to force a private party to turn over the document in its private possession.22

If a settlement agreement were submitted to the court for either approval or enforcement, then
the agreement would likely be considered to be a "court record" subject to disclosure.23

However, settlement agreements are generally not required to be submitted to a court for
approval. Usually, court approval is required only in limited circumstances, such as when one of
the parties is a minor.24

2.4 NEGOTIATION

Negotiation, unlike the other two techniques, does not employ the services of a neutral party.
This process of face-to-face bargaining between stakeholders, in an attempt to resolve issues on
which they disagree, is fundamental to al1 ADR processes. It is based on a mutual commitment
by the parties to seek a consensus solution; and if successful, to be bound by that solution. Taylor
(1992: 6) defines negotiation as "resolving conflict through a process of communication.

21
See U.S. v. Glens Falls Newspapers Inc. (2nd Cir.); In re Asbestos Products Liability Litigation (E.D. Pa., listed
below under 3d Cir.); Cincinnati Gas & Elec. Co. v. General Elec. Co. (6th Cir.); In re Cincinnati Enquirer (6th
Cir.); CMS Enterprise Group v. Ben & Jerry's Homemade, Inc. (Pennsylvania).
22
See Enprotech Corp. v. Renda (3d Cir.).
23
See Bank of America Nat'l Trust & Sav. Ass'n v. Hotel Rittenhouse Assocs. (3d Cir.); SEC v. Van
Waeyenberghe (5th Cir.); Union Oil Co. of Calif. v. Leavell (7th Cir.); EEOC v. The Erection Co. (9th Cir.); In re
Marriage of Johnson (Illinois).
24
See Duggan v. Koenig (Alaska); C.L. v. Edson (Wisconsin); Schnell v. Farmers Insurance Exchange (Wisconsin).
20
exchange, and commitment to a course of action. It is intended to reach an agreement that
benefits al1 parties while recognizing that each side will protect and promote its own self-
interest."

2.5 FACILITATION

Facilitation and mediation differ from each other in the degree of involvement of the neutral
party. The facilitator helps the parties to find a mutually acceptable agreement by working with
them to design a fair process, assisting them in obtaining the resources they require, managing
the logistics of organizing meetings, helping the parties to set and adhere to realistic deadlines,
maintaining order during the facilitation. maintaining a documentary record of what was said in
each session (if the parties wish), and coordinating the timely exchange of information between
the parties. The facilitator is essentially a process manager whose mandate is restricted to
procedural issues. This individual strives to maintain his or her own neutrality and credibility,
dong with the trust of the disputants. Facilitators must be completely independent of any of the
parties, which often requires special arrangements for the payment of their fees to avoid the
perception that they are working for any particular party. The parties jointly select the facilitator,
and in most cases any party has the power to terminate his or her services at any time.

2.6 MEDIATION

The most comprehensive definition of mediation is provided by Connick and Bingham (1987:
27): "Mediation is a voluntary process in which those involved in a dispute jointly explore and
reconcile their differences. The mediator has no authority to impose a settlement. His or her
strength lies in the ability to assist the partners in settling their own differences. The mediated
dispute is settled when the parties themselves reach what they consider to be a workable
solution." Unlike in the non-ADR process of arbitration. the mediator has no decision making or
adjudicatory authority; this is retained solely by the parties. A few of the parties may meet in
caucus with the mediator, as well as together with al1 of the other parties. The mediator
participates in the process by not only fulfilling al1 of the duties of a facilitator, but also by
contributing to discussions about the substance of the conflict. shuttling ideas and often back and
forth between the parties. helping each party to formulate proposals that are more likely to be
acceptable to the other parties, conducting private caucus sessions with fewer than the full
21
complement of parties, suggesting creative solutions. and assisting in the writing of the final
agreement. This requires considerable tact and discretion on the part of the mediator, to avoid
revealing sensitive information to one party that was disclosed to the mediator in confidence by
another. The mediator may provide each party with a confidential and independent assessment of
its position early in the mediation process. as well as help it to see the true interests underlying
its positions. Both of these assist the parties in finding realistic solutions to their outstanding
issues, and help them to decide whether they wish to continue in the mediation process or pursue
a remedy through a more conventional channel. Although the mediator is not a party to the
settlement and should have no bias with respect to its content, he or she shares with the parties
the responsibility for the quality of the settlement. The use of a mediator appears to be
particularly valuable to bring together parties whose inexperience with conflict resolution,
emotional involvement in the issues, or poor relationship would otherwise preclude effective
bargaining.

2.7 LOK ADALAT

Lok Adalat is a forum where the disputes pending in the court of law or at pre litigation stage are
settled/compromised amicably. Lok Adalat is one of the alternative dispute redresseal
mechanisms. Lok Adalat is a non adversarial system, whereby mock courts (called Lok Aalats)
are held by the State Authority, District Authority, Supreme court Legal Services committee,
High court Legal Services committee, or Taluk Legal Services committee. The governing statute
in regard to Lok Adalats is Legal Services Authorities Act, 1987.

22
CHAPTER-3 CHALLENGES IN INTRODUCING ADR SYSTEM IN INDIA

3.1 A BRIEF OVERVIEW

The Alternative Dispute Resolution (ADR) mechanisms slowly but gradually evolved to provide
justice to the persons in legal disputes. It is a process voluntary in nature and has gained legal
recognition in the contemporary world over a period of time. In India, Arbitration is an ancient
concept, finding its roots in ancient India. Panchayats are an example of such out of court dispute
resolution.25 The practice is still prevalent in villages even today where senior villagers sit and
resolve disputes of fellow villagers. ADR in India is governed by the Indian Arbitration and
Conciliation Act 1996. The Arbitration and Conciliation Act, 1996 as applicable in India today
was created on the lines of the Model Law of the UNCITRAL (United Nations Commission on
International Trade Law) but Alternate Dispute Resolution as such was incorporated in laws of
India as way back in 1840.26 Over a period of time, processes, procedures and powers pertaining
to Arbitration and the right of parties to the same were incorporated in The Civil Procedure
Code, Indian Contract Act, Specific Relief Act and by further incorporation of Indian Arbitration
Act 1899, subsequently repealed by the Indian Arbitration Act of 1940 and them finally by the
Arbitration and Conciliation Act, 1996 which came in force with effect from 25th January 1996.
As said above originally, in ancient India, ADR as we know today was the way disputes were
generally settled. The whole village by way of Gram Panchayat used to solve the problems of the
villagers by sitting together and mediating the problems faced by the two parties. 27 Since the
advent of the modern legal system, this method of dispute settlement has largely been set aside.
Today, this age old method of dispute settlement has become corporate savvy and exclusive to
big concerns.28 It has become the talk of the boardrooms and the way the corporate world now
looks towards settlement of disputes.

The reason as to why such a phenomenon is witnessed in our country is very interesting. First of
all, the process still is a very costly affair as very few people specialize in this field that are

25
“The Report of the Expert Committee on Legal Aid: Processual Justice to the People”
26
Act IX of 1840
27
K Ravi Kumar, ―Alternative Dispute Resolution in Construction Industry”, International Council of Consultants
(ICC) papers, available at www.iccindia.org, at p. 2
28
―Report on National Juridicare Equal Justice – Social Justice”, Ministry of Law, Justice and Company Affairs,
1977 Report
23
competent enough to arbitrate on various matters, thereby resulting in making ADR a very
exclusive and high end service.29 Secondly, ADR is just too flexible in nature and there is no
guarantee in its proceedings. There is no set procedure which is required to be followed while
finding solutions through ADR. Such a system juxtaposed with the modern legal system which is
time-tested, predictable and follows a set procedure, becomes a much safer and hence attractive
option for dispute settlement for the common man than arbitration. 30 Also, the Indian Law
recognizes mainly Arbitration as a way of ADR which pretty much curtails the full scope of
ADR. The major drawback due to the same is that Arbitration involves the principle of
arbitrability of subject matter. Since most matters which have a specific legislation to its name
are left out due to the non-arbitrability of its subject matter,the actual scope of ADR is heavily
compromised on. It is important that if ADR has to reach the common man and not just remain a
corporate toy then it be allowed to spread out its wings and fly. Fed up with the regular litigation
in courts, business persons very smartly resorted to arbitration, as a large number of companies
in the world do, only to discover shockingly that on most of the occasions it is even worse than
litigation.31

3.1.1 LEGISLATIVE PROBLEMS

The 1996 Act was brought on the statute book as the earlier law, the 1940 Act, did not live up to
the aspirations of the people of India in general, and the business community in particular. The
primary purpose of enacting the 1996 Act was to conform to the UNCITRAL Model Law and
thus fulfil the international obligation and also to placate the business community. Unfortunately,
at that time there was no thorough scrutiny of the Model Law. While the U.K. did not adopt the
Model Law completely and several other countries, including the U.S., never went to adopt the
Model Law, India adopted it fully.32 As a matter of fact, India simply copied the provisions of
UNCITRAL Model Law. No attention was paid to the special needs of business community in
India, the legal environment, social conditions, lack of judges and infrastructure in the courts,
etc.

29
Inaugural address by Justice K G Balakrishnan, Chief Justice of India, on International Conference on
‘Institutional Arbitration in Infrastructure and Construction‘, New Delhi, October 16, 2008
30
Rishabh Sinha, Sarabjeet Singh, “Taking Alternative Dispute Resolution To The Common Man”, National Law
Institute University, Bhopal
31
Hernando de Soto, The Other Path, 1st ed., Harper & Row (1989)
32
Paul Whitley, “ARBITRATION IN INDIA”, Talk to the European Branch of the C.I.Arb. at Salice d‘Ulcio, Italy,
9th / 10th April 2005
24
The result was predictable – there would be chaos. Whenever there is chaos and confusion,
certain groups of people prosper. They make the most of the chaotic situation. The same
happened in India. During all this confusion with the enforcement of new law, the lawyers, as
always, emerged as the group benefiting most from the situation. As the situation was unclear as
to what would happen with the new sections in the new law, how the courts would interpret
different words and phrases, the business community ‘s anxiety grew with each passing day. 33
Besides the lawyers, the retired judges also made a lot of hay. And, as the sun is still shining
bright, they are continuously making more and more hay. 34 We will do well to remember that
judges and lawyers, somewhere in the heart of hearts, are not two different sections. They are the
same. Most of the judges, at some point of time in their career, have been lawyers. Thus, it is a
simple case of ‘you scratch my back and I will scratch yours.’ Barring a few, with their spine
intact, others give arbitration reforms only a lip service. The new Act has, more than once,
proved to be a legislative failure. A number of loopholes have made this legislation a good
example of ‘bad legislative effort.’ The definition of “Court” 35 in the Arbitration and
Conciliation Act, 1996, is substantially different from that in the earlier law of 1940. Due to this
new definition, there is tremendous load of work on the District Judge, which was earlier shared
by other judges in the Civil Court. The experience of the last ten years testifies it amply that the
District Judge is not able to devote as much time as is expected to arbitration matters and the
cases are simply poling up. It adds to the delay and makes matters worse for the litigants. The
District Judge is the senior-most judge in the district taking care of civil matters and as a matter
of practice, she is also the senior-most judge taking care of criminal matters as the Sessions
Judge. The designation of the head of the District Judiciary is, therefore, ―District and Sessions
Judge‖. As the routine criminal matters of bail, interim applications, etc. are much more urgent
than the civil matters like arbitration, most of the time of the District and Sessions Judge is
devoted to criminal matters. Even with the best of intentions, the District and Sessions Judge is
generally not able to earmark sufficient time for arbitration matters which require in-depth study.

Barring a few cities where the High Courts exercise ordinary original civil jurisdiction, all
matters pertaining to arbitration have to be filed in the principal Civil Court of original
jurisdiction in a district. By definition this is the Court of the ―District Judge‖. Any civil court
of a grade inferior to such principal Civil Court or any Court of Small Causes has been
33
Kachwaha, Sumeet, “The Indian Arbitration Law : Towards a New Jurisprudence”, Int. A.L.R. 2007, 10(1), p. 13-
17
34
Javed, “Judicial Ambush of Arbitration in India”, L.Q.R. 2004, 120 (OCT), pp. 571-574
35
Sec. 2 (e), The Arbitration and Conciliation Act, 1996
25
intentionally kept out by the legislature. This leaves the Court of the District Judge and only this
court to have jurisdiction over arbitration matters.36

Thus, the arbitration matters keep pending and litigants have no option but to wait patiently. At
times, litigants do opt for extra-legal methods to settle the dispute which is not a good practice
for the economy and the society. It brings a bad name to the judicial system and erosion in faith
starts taking place. It also forces foreign investors and business partners to perceive India as a
place with slow-moving judiciary. Therefore, there is an adverse effect on the business in
particular and economy in general.37

3.1..2 INTERVENTION OF COURTS

The primary purpose of Alternative Dispute Resolution (ADR) methods, of which arbitration is
the most popular, is to avoid going to the court. However, intervention by courts is inevitable. At
times the interference is desirable so as to prevent the arbitration process from going astray.
Interference by courts is universal and is observed throughout the world. In most of the
jurisdictions, the subordinate judiciary is empowered to look into arbitration matters, however, a
number of matters reach the highest court. India follows the same system and a large number of
arbitration matters are filed in the lower courts.

As arbitration is a creation of contract between the parties. Hence, party autonomy is the heart
and soul of each and every arbitration contract. However, this autonomy is not unbridled. The
applicable law and public policy provide the boundaries to this autonomy. Rules of arbitral
institutions also curtail the autonomy of parties. Moreover, intervention of courts becomes
necessary in cases of bias of arbitrators, misconduct of proceedings, etc. Courts also intervene in
setting aside or enforcing an award. Complete freedom to parties to do what they like in an
arbitration is not acceptable and the natural corollary is that complete non-interference by courts
in undesirable. For instance, in the Hooters case, 38 the court refused to uphold the arbitration
clause and said,

“The parties agreed to submit their claims to arbitration-- a system whereby disputes are fairly
resolved by an impartial third party. Hooters by contract took on the obligation of establishing

36
Special Address by Dr. S. Muralidhar, International Conference on ADR, Conciliation, Mediation and Case
Management Organised By the Law Commission of India at New Delhi on May 3-4, 2003
37
Indu Malhotra, “Fast Track Arbitration”, ICA‘s Arbitration Quarterly, ICA, 2006, vol. XLI/No.1 at p 8
38
Hooters of America v. Phillips, U.S. 4th Circuit Court of Appeals, CA-96-3360-4-22, Decided: April 8, 1999
26
such a system. By creating a sham system unworthy even of the name of arbitration, Hooters
completely failed in performing its contractual duty.”

Interference by courts in such cases is essential, desirable and should never be done away with,
howsoever strong the critics are.

Major thrust and legislative intent of the new Arbitration and Conciliation Act, 1996 is to reduce
excessive judicial intervention due to which the earlier Arbitration Act, 1940 suffered serious
infirmities. Section 8(1) of the New Act, therefore, makes it mandatory duty for the judicial
authority i.e. court to stay legal proceedings if started, where the subject matter has been referred
to an arbitral tribunal. Similar provisions are made in connection with the New York and
Geneva.

The enactment of the 1996 Act was initially met with approbation by the Court in cases like
Konkan Case39, (which stated clearly that the provisions of the 1996 Act unequivocally indicate
that the Act limits intervention of the Court with an arbitral process to the minimum) but
subsequent reality however, has been far from ideal. Even as a global study has indicated that an
overwhelming 91% of the respondents were against the mechanism of appealing international
arbitration, cases like ONGC Case40 and SBP & Co Case41. Have sharply belied governmental
attempts to promote arbitration in India. ONGC Case witnessed the challenge of an arbitral
award on the ground that it was ‘in conflict with the public policy of India’; instead of taking a
narrow interpretation of the phrase ‘public policy’ as being something in excess of a prima facie
transgression of Indian law, the Court adopted a very broad understanding of the same. The
Court went on to equate ‘patent illegality’ with ‘error of law’ and held that any contravention of
an Indian legislation would ipso facto make the award violative of public policy.

The doors were thus flung open for the very rounds of painstaking judicial review that the Act
was put in place to avoid42. SBP & Co further extended the scope of judicial intervention when
the Supreme Court ruled that it was within the powers of the Chief Justice of India to adjudicate
on issues like valid arbitration agreements and went on to state that the CJ could even call for
evidence to resolve jurisdictional issues while performing the function of appointing an arbitrator
when the parties failed to come to an agreement. The Supreme Court went on to say that such
decisions would be final and binding upon the parties. This effectively flouted the principle of
39
Konkan Railway Corporation v. Mehul Construction Co., 2000 (7) SCC 201
40
Oil and Natural Gas Corporation v. SAW Pipes, (2003) 5 SCC 705
41
SBP & Co. v. Patel Engineering, (2005) 8 SCC 618
42
Aloke Ray, Dipen Sabharwal, “What Next for Indian Arbitration?”, The Economic Times, 29 August, 2006
27
competence and thus amounted to a situation where the arbitral tribunal’s power to determine its
jurisdiction was undermined.

Effectively therefore, Courts endowed themselves with powers which would substantively delay
arbitral proceedings (be it by raising specious objections to preliminary issues or by sabotaging
the appointment process) which goes against the fundamental reason for enacting Section 13 of
the 1996 Act. This thus brings us to what has been called the dispute between high principles
(stressing the need for justice, though the heavens fall) and low principles (an equally insistent
clamour to end litigation) in adjudication today43. The expansion of the Court’s intervention into
the judicial sphere has aroused serious misgivings; ONGC’s expansive interpretation of the term
‘public policy’ has been followed by a catena of cases which all reiterate the judiciary’s right to
review the arbitral award. In cases like Hindustan Zinc Case, 44 the Supreme Court has stated that
awards could be set aside on grounds like being contrary to the terms of contract since ONGC
gave license for interference in such grounds. This indeed sets a dangerous precedent since, as
stated earlier; the encouragement of ADR was based on a need to circumvent the lengthy court
process. The debate between finality and justice is perhaps best resolved by the reasoned
judgment of EVANS J., in Indian Oil Case 45 where he held that ―these two factors are not
inconsistent with each other. If either of them is to prevail, then it should be the requirement of
justice. But justice, even fairness, is not an abstract concept. It has to be applied in this context
between two parties who were in dispute with each other and who agreed that the dispute should
be resolved by an arbitral tribunal. They agreed that the tribunal's award should be final. But they
agreed this on the basis that the arbitration procedure would be regulated by law. The Court has
statutory power to set aside an award when the arbitrators misconduct themselves or the
references. But it also has the unqualified discretion to remit the award to the chosen tribunal. If
the power is exercised, but only in circumstances when it would be unjust not to do so, then there
is not, in my judgment, an uncovenanted or an unacceptable restriction on the agreed finality of
the tribunal's award.”

3.1.3 CULTURAL NORMS

In general, the community throughout India is still manifesting its hostility to arbitration. The
continuing attitude of certain urban arbitrators being characterized by a lack of sensitivity

43
Zaiwalla, Sarosh, “Challenging Arbitral Awards: Finality is Good but Justice is Better”, 20(2), Journal of
International Arbitration , 2003
44
Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445
45
Indian Oil Corporation Ltd., v. Coastal Bermuda Ltd., [1990] 2 Lloyd‘s Rep., 407
28
towards the national law of a developing country as ours and their mandatory application, either
due to the ignorance, carelessness, or to unjustified psychological superiority complexes,
negatively affecting the legal environment required to promote the concept of arbitration
especially in the field of business relationships.46

The arbitrators do not understand how things are done in various parts of India. Hardly any of
them have any connection with or understanding of traditions and cultures of whole India. They
do not even take the trouble to understand parties’ perspective in the proceeding at hand.

Of themselves, such comments might simply be a reflection of ―sour grapes‖ – parties finding
some reason to criticise a process which they feel is outside their control or delivers a result
which does not reflect their wishful thinking. If that were the only (or predominant basis) for
such comments, they would be easy to explain away.

People from different backgrounds (ethnic, religion, racial, caste etc.) often harbour predisposed
standpoints regarding each other’s cultures, customs and attitudes. It is not difficult to see how
this could erroneously translate into a perception of bias vis an Arbitral Tribunal which does not
reflect the culture of one or more of the parties. Arbitrators above all need to be aware of such
considerations and adjust their approach accordingly.47

Unfortunately, Politics and religion factors may also play a part in the dynamic which is the
relationship between the Tribunal and the parties. The role of the Tribunal should include
awareness of potential issues and using the process dynamically to avoid such issues affecting
the process negatively (a simple illustration of this might be persuading the parties to shake
hands with each other at the beginning of the hearing, and taking other steps to “break the ice”,
as well as making the atmosphere less confrontational).

Miscommunication is also a major barrier for arbitration in India. In a country which has many
languages, words spoken can often acquire a very different connotation when translated. 48 Body
language, facial expressions and gestures can sometime send the wrong signals.

How business is done in different cultures may reveal stark differences. In the not too distant
past, a nod and a handshake were often the only evidence to signify that an agreement had been
reached. Even now, some jurisdictions reveal very clear patterns of behavior in the way business
46
Sarah Hilmer, “Did Arbitration Fail India or Did India Fail Arbitration”, Int. A.L.R. 10(2), 2007, pp. 33-37
47
Khawar Qureshi, ―Cultural sensitivity and International Arbitration”, McNair Chambers, accessed at
www.McNairChambers.com, 29th June 2008
48
Prathamesh D. Popat, “ Online Dispute Resolution In India”, Proceedings of the UNECE Forum on ODR 2003
29
is done. Indeed, there have been dramatic changes over the past decade with contracts in India
becoming much more detailed and heavily negotiated than was previously the case. However,
the Tribunal needs to be alive to such potential differences of approach, which might easily be
interpreted otherwise as a lack of evidence to substantiate a particular position.

3.1.4 ADEQUATE HUMAN RESOURCES

A system is as good as the people who work it. Because of a number of reasons – vested interests
of different professional groups being one of the most important – arbitration has not been as
efficacious as it should have been.49 Lawyers too, are often not trained in the law and practice of
arbitration and there is a tendency among them to prolong arbitrations, seek unnecessary
adjournments, sandwich arbitrations between their regular court appearances, etc., all of which
add up to a lack of standards in conducting arbitration in India. This has driven parties to opt for
arbitration outside the country (adding to the gravitational popularity of London and,
increasingly, Singapore as centres of international dispute resolution), or even go back to
choosing litigation in Indian courts as a `lesser evil'.

It is not enough to simply enact a progressive law on arbitration. It is much like having a brand
new stadium, a certified football and a first-rate football field. One also needs welltrained players
and referees who know the rules of the game.

The availability of skilled, trained and honest arbitrators as well as well-equipped arbitral
institutions is vital for the further success of arbitration in India. If there is an emergent opinion
that by choosing arbitration over litigation, parties have substantially diminished their chances of
getting good quality of justice, that would obviously bode ill for the future of arbitration. What is
needed is inculcation of a culture of arbitration among the key stakeholders — the bar, the
Bench, the arbitrators, arbitral institutions and the consumers of arbitration and for them to
display a sincere commitment to prevent the `banalisation' of arbitration.50

Indian lawyers and judges will do well to be aware of and absorb some of the best arbitration
practices from jurisdictions which have a more developed culture of arbitration, if arbitration is
to provide the benefits it is capable of delivering. Ten years on, arbitration in India under the
1996 Act is far from having fulfilled its potential and continues to be on probation.

Justice S.B.Sinha, “ADR and Access to Justice: Issues and Perspectives”, SCR, 2008
49

Nancy J. Manring,‖ ADR and Administrative Responsiveness: Challenges for Public Administrators”, Public
50

Administration Review, Vol. 54, No. 2 (Mar. - Apr., 1994), pp. 197- 203
30
Further, most ad hoc arbitrations or even institutional arbitrations in India are conducted by
retired members of the judiciary who by virtue of long tenures behind the Bench have got
accustomed to tedious civil procedure and evidence rules (which they are exempt from applying
to arbitration proceedings) and fall into that trap much too easily. As a result, arbitrations
effectively become a battle of pleadings and procedures, with each party trying its best to stall if
it works in their favour. Moreover, having retired and having an opportunity to earn some post
retirement money, coupled with the fact that there is no fixed schedule of fees and it is totally up
to the whim and fancy of the Arbitrator to fix his fee, a self-interest for prolonging the
proceedings comes into picture. Needless to say, quite a few arbitrators find it difficult to
maintain that balance unless they are either overloaded with work (in which case they are
earning anyway) or they find pride in quick disposal, monetary issues being irrelevant. 51 The
Arbitrator may not be familiar with Arbitration law or how to properly conduct the process.
Furthermore, the retired judge will also not be familiar with technical expert matters.

3.1.5 FINANCIAL RESOURCES

However, at any rate in India, it is becoming increasingly common for arbitration proceedings
being conducted at expensive venues. On several occasions, even when the proceedings last for a
very short duration, the parties have to pay for a whole day. If the venue is a five-star hotel, the
expense will be heavier.52 Parties feel embarrassed if they have to reject request for an expensive
venue.

On the other hand, there are places available, which are fairly decent and not as costly as five star
hotels. Several public institutions do make their conference rooms available for arbitration and
all facilities are available at inexpensive rates. The Commission has been informed that in certain
arbitrations which have been continuing for years, the costs of meeting the expenses of the venue
are running into lakhs of rupees. One party who is rich enough may agree but another, not so
rich, may not, but may have to share the huge costs ultimately, depending upon the order of the
arbitral tribunal as to cost in the award.

Another more important aspect is the huge expense in arbitrations. While the Judges who decide
cases in courts are paid by the State, the case of arbitrators is different. Parties have to pay fee to
arbitrators also. Lawyers’ fee is anyway there whether before courts or before arbitrators. These

D. M. Popat, ―ADR AND INDIA: AN OVERVIEW”, THE CHARTERED ACCOUNTANT, DEC 2004, p. 756
51

Christine Cervenak, David Fairman and Elizabeth McClintock, ―Leaping the Bar: Overcoming Legal Opposition
52

To ADR in the Developing World”, Dispute Resolution Magazine, Spring 1998

31
days fee payable to arbitrators is quite heavy. We have obtained the views of lawyers and
arbitrators. But we have to take care of interest of the parties also.

Further it needs to be considered what happens if the appointment of arbitrators is to be

automatic and if the appointing authority under Section 11 should consider nothing else.

The prevalent procedure before the arbitrators today is that at the first hearing, the claimant is
directed to file his claim statement and documents in support thereof. At the second hearing, the
opposite parties are directed to file their reply and documents. Then, the claimant files his
rejoinder at the third hearing. Normally at each of these stages, there are at least two or three
adjournments. Sometimes, applications for interim directions are also filed. Thus, today, the first
occasion for considering any question of jurisdiction does not normally arise till at least 6
adjournments have gone by. If the respondent is the State or a public sector undertaking, the 28
Christine Cervenak, David Fairman and Elizabeth McClintock, ―Leaping the Bar: Overcoming
Legal Opposition To ADR in the Developing World”, Dispute Resolution Magazine, Spring
1998 14 number of adjournments are certainly more. Parties pay fees to the arbitrator s for each
hearing running into thousands of rupees.

If indeed it is a party‘s plea that there is no dispute that can be referred to arbitration (because the
contractor has given a ‗no claims‘ letter) or if it is the plea that the dispute is ‗excepted‘ from
arbitration or if a person says, he is not a party to the arbitration, or that the arbitration agreement
is not in existence, these issues can normally be taken up only after at least five or six
adjournments have taken place. By that time, quite a large amount of money would become
payable towards the arbitration fees or may have been paid. Therefore, the cost factor is also
important for the parties and cannot be left out of consideration.53

Lastly, if the Government or a public sector undertaking has clear documents to show that there
is no dispute in existence or that the dispute relates to an ‗excepted item‘, or if a person says, he
is not a party to the arbitration agreement, there is no reason why an expensive procedure of
arbitration should be invariably embarked upon.

3.1.6 LACK OF ADEQUATE POLITICAL SUPPORT

India follows the doctrine of separation of powers. The three organs – Legislature, Executive and
Judiciary – work independently, however, there is definite overlap between the first two. The
President is the Chief Executive and also an integral part of the Union Legislature. All the
53
Indu Malhotra, ‗Fast Track Arbitration‘, ICA’s Arbitration Quarterly, ICA, 2006, vol. XLI/No.1, p. 29
32
members of the Council of Minister, which is headed by the Prime Minister, must be a member
of parliament, and if not, must become a member within six months. Thus, the Government has a
definitive say in the legislative work. Due to coalition governments coming to power for a
number of years, the main ruling party‘s agenda must be acceptable to other coalition partners
and it surely dents the definitive say of the Government. In the last couple of years it has become
increasingly difficult for the Government to be sure of getting even the bills introduced by the
Government itself, passed in the Parliament. One such example is the Arbitration and
Conciliation (Amendment) Bill, 2003 which was introduced by the Government of the day on
the recommendation of the Law Commission. It becomes even more difficult with clash of
personalities and egos resulting in hijacking of law making system by a couple of self-
proclaimed Messiah of masses. In 2001, the Sixteenth Law Commission, under the chairmanship
of Justice B. P. Jeevan Reddy, forwarded a report, number 176, to the Union Government
suggesting necessary amendments to the 1996 Act after five years of its coming into force. 54 The
then Union Law Minister, Mr. Arun Jaitely, had expressed his desire to get the new law on
arbitration reviewed as various shortcomings were observed by the legal and business fraternity
in its provisions and certain representations received by the Law Minister.

The Commission initially prepared a Consultation Paper and held two seminars, one at Mumbai
and another at Delhi in the months of February and March, 2001 and gave wide publicity to the
paper by putting it on the website. Retired judges and leading lawyers were invited for the
seminars. Many luminaries also participated in the seminars and gave their written notes putting
forth their suggestions. Proposals not contained in the Consultation Paper were also made and
were exhaustively discussed. After making an in-depth study of the law relating to subject,
looking into the position of the law in foreign jurisdictions, the Commission made various
recommendations for bringing amendments in the 1996 Act. A Bill entitled ‗The Arbitration and
Conciliation (Amendment) Bill, 2001‘ had also been prepared by the Commission bringing out
various provisions through which the 1996 Act was proposed to be amended. The Government
was supposed to act with alacrity so that the necessary amendments could be made timely. With
such an innocuous thing as the definition of ‗court‘, which should not have been juggled in the
first place, and for which there was agreement between all the concerned parties and there was
the recommendation of the Law Commission, the Government did not act speedily resulting in
further delay. The Government took time in going through the Law Commission‘s report

54
Law Commission of India, One Hundred And Seventy Sixth Report On The Arbitration And Conciliation
(Amendment) Bill, 2001
33
forwarded in September 2001. It took two years to propose an amendment. On December 22,
2003, Mr. Arun Jaitley, the then Law Minister, introduced the ‗Arbitration and Conciliation
(Amendment) Bill, 2003‘ (hereinafter the 2003 Bill) in the Rajya Sabha. 55 The Bill proposed
several amendments. Political rivalry has resulted in the withdrawal of the 2003 Bill. Even when
the amendments suggested by the Law Commission and later introduced in the Rajya Sabha as
the 2003 Bill are apparently in the interest of the people at large, clash of two giants is holding
the nation to ransom. The question which needs to be raised at this time is the wisdom of simply
copying a legislation without modifying it to our needs. Also, it is high time to question the
wisdom of constituting so many committees to look into the recommendations of the Law
Commission. It is a well-known fact that Law Commission has very eminent legal experts as
members. Law Commission reports are a work of collective wisdom. How can it be questioned?
Not once, but so many times. How many times do we need to review the work done by the Law
Commission and then the Legislative Wing of the Government? This must come to an end. Also,
the persons constituting all these committees must introspect as to whatever they have been
doing in the name of reviewing the reports of the Law Commission is worthwhile or not.

3.2 CONCLUSION

As discussed earlier, there are many legal, socio and economic problems in ADR mechanism in
India. These problems arise due to diverse and culturally rich population of India as well as lack
of political goodwill in this regard.

To overcome these barriers Government must act strictly and should first of all adopt 176th Law
Commission‘s Report. Coupled with this Government at both state and Union Level must come
up with awareness programmes not only for the citizens but also for the arbitrators. ADR is a
fairly new concept and concepts like these not only take time in percolating to the grass root
levels, acceptance of such a concept is also a big problem. Therefore a robust programme
imparting legal literacy to the masses in India, especially in the field of ADR becomes a
necessity. Not only will this allow bringing ADR to the common man, an aware citizen will
contribute positively to the development of the nation too.

The common citizens are also to be blamed for this error in ADR mechanism too. People should
opt for ADR instead of litigation and use this mechanism wisely in order to get speedy and cost
55
Bill No. LXXV of 2003, Introduced in Rajya Sabha on December 22, 2003; available at
http://rajyasabha.nic.in/bills-ls-rs/arch2003.htm, accessed on 20th August, 2010
34
efficient justice. The purpose which ADR was supposed to achieve. The legal education of
today‘s India needs to take the ADR mechanisms seriously. Today these mechanisms are taught
only as part of speciality courses which primarily focus on the deployment of these processes
pertaining to areas of corporate mergers and amalgamations.

India is a nation which epitomises a subtle mix of the modern and the ancient. The preservation
of the best of both is what Indians are best at. Keeping in mind the same spirit of India, the
common Indian of today should get the best of all the dispute resolution mechanisms in India.
The motive behind any legislation, amendment or new introduction has and always been the
welfare of the ordinary citizen of the country.

CHAPTER-4 ANALYSIS OF THE ARBITRATION AND CONCILIATION

(AMENDMENT) ACT, 2015

After much clamour, the Arbitration and Conciliation Act, 1996 ("Arbitration Act") finally
stands amended. The Arbitration and Conciliation (Amendment) Act, 2015 ("Amendment Act"),
which received the assent of the President of India on December 31, 2015 and deemed to have
35
come into force on October 23, 2015, has proposed sweeping changes to the Arbitration Act. The
route to the Amendment Act has been a rather arduous.

The Arbitration Act was enacted in the year 1996, with the intention of providing speedy and
effective resolution of disputes through arbitration or conciliation and reduce the burden on
courts. However, the arbitration experience in India has been subject to intense scrutiny over the
years, leaving the parties to ponder whether or not to incorporate arbitration clauses. Taking note
of the criticisms in the earlier arbitration regime, the Law Commission of India ("Law
Commission") had submitted its Report No.246 in August 2014 ("Law Commission Report")
recommending several changes to the Arbitration Act. On 23 October, 2015, the President of
India promulgated an ordinance ("Arbitration Ordinance") to bring into force number of these
amendments to the Arbitration Act.56 Since the amendments were brought through an ordinance,
confusion and uncertainty still prevailed, and there was also no clarity on whether such
amendments would be prospective or retrospective in operation.

The Amendment Act is most certainly a welcome move and has been hailed for providing the
much needed impetus to the growth of the Indian arbitration regime. Despite some deviations,
the Amendment Act is largely in consonance with the Law Commission Report and the
Arbitration Ordinance. However, there have been lapses in drafting the new law, and some more
steps could have been taken by the law makers to ensure that India does indeed become the next
arbitration hub. This chapter aims to provide insights and critically analyse the Amendment Act
with suggestions to make the Arbitration Act more effective.

A. INTERIM RELIEF

I. FROM COURT

After the judgment of the Supreme Court in Bharat Aluminium and Co. v. Kaiser Aluminium and
Co.("BALCO")57 the Indian courts had no jurisdiction to intervene in arbitrations which were
seated outside India. Post BALCO, if the assets of a party was located in India, and there was a
56
(http://www.mondaq.com/india/x/452076/Arbitration+Dispute+Resolution/Amendments+To+Indias+Arbitration+
Act+An+Analysis)
57
(2012) 9 SCC 552
36
likelihood of the dissipation of the assets, the other party could not approach the Indian courts for
interim orders. Since the interim orders made by arbitral tribunals outside India could not be
enforced in India, it created major hurdles for parties who had chosen to arbitrate outside India.

This anomaly has been addressed in the Amendment Act with the insertion of Section 2(2),
which makes the provision for interim relief(s) also applicable in cases where the place of
arbitration is outside India, subject to an agreement to the contrary. However, there are few
concerns. This option is only applicable to parties to an "international commercial arbitration"
with a seat outside India. This means that the protection will not be available to two Indian
parties who choose to arbitrate outside India.

The Amendment Act provides that in case the court passes an interim order, arbitration
proceedings must commence within a period of 90 (ninety) days from the date of such order or
within such time as prescribed by the court. This amendment was brought in to ensure that the
practice of the parties of misusing this provision, by strategically obtaining exparte or ad interim
orders and not proceeding with arbitration, is checked.

However, there is no clarity on whether the 90 (ninety) day period would commence from the
date of the exparte or ad interim order or the final order in the proceedings under Section 9. This
aspect should have been clarified. The better approach perhaps would have been to specify that
the 90 (ninety) day period commences from the date of filing of the petition, in order to drive the
parties to arbitration.58

II. ARBITRAL TRIBUNAL

The amendments to Section 17 empowers the arbitral tribunal with the same powers as that of a
court under Section 9. In order to facilitate the parties to approach the arbitral tribunal and reduce
the intervention of courts, the Amendment Act provides that once the arbitral tribunal has been
constituted, courts cannot entertain application for interim measures, unless there are
circumstances which may not render the remedy of obtaining interim orders from the arbitral
tribunal efficacious.

The Amendment Act also clarifies that such interim measures granted by the arbitral tribunal
would have the same effect as that of a civil court order under the Civil Procedure Code, 1908

58
Please see article by Mr. Promod Nair on the Arbitration Ordinance: (http://barandbench.com/when-good-
intentions-are-not-good-enough-the-arbitration-ordinance-in-india/)
37
("CPC"). This is a significant development as the interim orders of the arbitral tribunal under the
earlier arbitration regime could not be statutorily enforced, virtually rendering them meaningless.

However, in a recent judgment passed by the Kerala High Court on March 16, 2016 in Writ
Petition (Civil) No. 38725 of 2015, the Single Judge has taken a view that under the Amendment
Act, the arbitral tribunal cannot pass an order to enforce its own orders and the parties will have
to approach the courts for seeking such enforcement, thereby making the enforcement of arbitral
awards cumbersome. It will be interesting to see how the other courts interpret this judgment and
if this stands the test of further judicial scrutiny.

Under the new regime, the arbitral tribunal has the power to order interim measures even after
the making of the arbitral award, but before it is enforced. However, this is inconsistent with
Section 32, which provides that the mandate of an arbitral tribunal shall be terminated after the
making of the final award. If the arbitral tribunal ceases to have jurisdiction after passing the
final award, it is inconceivable as to how it would have the power to order interim measures after
the making of the final award. This anomaly ought to have rectified by appropriate amendments
to Section 32.

B. LIMITED SCOPE TO REFUSE ARBITRATION REQUEST

The amended Section 8 empowers the judicial authority to refer the parties to arbitration when
there is an arbitration agreement, unless it finds prima facie that no valid arbitration agreement
exists. While Section 8(1) refers to "judicial authority", inexplicably, in Section 8(2) the word
"Court" has been used instead of "judicial authority" which appears to be an oversight.59

While the scope under amended Section 11 is limited to the examination of the existence of an
arbitration agreement; scope under amended Section 8 appears to be broader in as much as the
judicial authority can also examine the validity of the arbitration clause. There appears to be
different standards set for examination of an arbitration agreement under Sections 8 and 11,
which ought to have been avoided. The standards consistent with the proposals made in the Law
Commission Report ought to have been made uniformly applicable to both provisions.

C. AMENDMENTS TO GROUNDS FOR CHALLENGING ARBITRAL AWARD

The scope of "public policy" in Section 34 has been narrowed and the award can be set aside
only if the arbitral award

59
Supra Note 3
38
 (i) was induced or affected by fraud or corruption; or
(ii) is in contravention with the fundamental policy of India; or
(iii) conflicts with the most basic notions of morality or justice.

In order to counter the judgment of the Supreme Court in ONGC Limited v. Western Geo
International Limited,60 (which expanded the scope of "public policy" to include Wednesbury
principle of reasonableness which would necessarily entail a review on merits of the arbitral
award), the Law Commission had submitted its Supplementary Report in February 2015, which
recommendations have been accepted and incorporated through insertion of Section 2A. In terms
of this amended provision, an award cannot be set aside merely on the ground of erroneous
application of the law or by re-appreciation of evidence.

However, interestingly, the test of "patent illegality appearing on the face of the award" has not
been made applicable to international commercial arbitrations. This provision may be subjected
to challenge by Indian parties, who may contend that different standards ought not to be set for
international commercial arbitrations. The test of "patent illegality" could perhaps have been
deleted all together to avoid this anomaly.

D. NO AUTOMATIC STAY OF ARBITRAL AWARD UPON FILING OF A CHALLENGE

TO THE ARBITRAL AWARD

Prior to the Amendment Act, mere filing of a challenge petition to the arbitral award would
result in an automatic stay of the arbitral award. The court would take several years to decide the
petition, making the process of arbitration time consuming and ineffective. In a welcome move,
the Amendment Act provides that there would be no automatic stay of the arbitral award and a
separate application will have to be filed seeking stay of the arbitral award. The court is now
required to record reasons for grant of stay and the provisions of the CPC for grant of stay of a
money decree have been made applicable, meaning thereby that the losing party will necessarily
be required to either deposit some part or the entire sum awarded in the arbitral award, or furnish
security, as the court deems fit.

E. TIME BOUND PROCEEDINGS

The Amended Act provides for faster timelines to make the arbitration process more effective.
Proviso to Section 24 has been added providing for the arbitral tribunal to hold oral hearings for
evidence and oral argument on day-to-day basis and not grant any adjournments unless sufficient
60
(2014) 9 SCC 263
39
cause is made out. The arbitral tribunal has been vested with the power to impose heavy costs for
adjournments without sufficient cause.

Every arbitral award must be made within 12 (twelve) months from the date the arbitrator(s)
receives a written notice of appointment. The parties may mutually decide to extend the time
limit by not more than 6 (six) months. If the award is not made within 18 (eighteen) months, the
mandate of the arbitrator(s) will terminate unless the court extends the period upon an
application filed by any of the parties. However, there is no time period fixed for approaching the
court seeking extension of time which may again contribute to delays.

Further, while extending the time for making the award, if the court finds that the delay was
attributable to the arbitral tribunal, it may order reduction in the arbitrator's fee by not exceeding
5% (five percent) for each month of such delay. The court while extending the time limit would
also have the right to change the arbitrator(s) as it may deem fit. An application to the court, as
stated above would be endeavoured to be disposed by the court within 60 (sixty) days from the
date the opposite party receives the notice. A challenge to an arbitral award should be disposed
expeditiously and in any event within a period of one year from the date on which notice is
served upon the other party. Section 11 will now have to be decided within a period of 60 (sixty)
days from the date of service of notice to the opposite party.

In an arbitration regime that was plagued with delays and costs, this is a good development.
However, the parties would be forced to go court to seek extensions of time to complete the
arbitrations, which is an undesirable situation in a court system burdened with huge pendency of
cases.

Interestingly, it would appear that even the arbitration institutions would be required to make an
application for extension of time if the award is not rendered within the specified period. It is
indeed an undesirable situation to have parties including the institutional arbitrations with their
own set of rules, to be forced to come to court seeking extension of time to complete the
arbitration proceedings.61

Further, the proposed time line of 12 (twelve) months to pass the arbitral award is very
ambitious, even by international standards. There are some complex disputes, the resolution of
which may not be possible within this time frame. Even the Law Commission Report had
recommended a time period of 24 (twenty four) months to complete the arbitration proceedings.

61
Supra Note 3
40
Such ambitious time lines may act as a deterrent for foreign parties to choose India as the seat of
arbitration, particularly in complex disputes. Providing ambitious timelines may actually backfire
and go contrary to the very purpose of introducing these amendments.

F. FAST TRACK PROCEDURE

Section 29B has been introduced which gives an option to the parties to agree on a fast track
mechanism under which the award will have to be made within a period of 6 (six) months from
the date the arbitrator(s) receiving written notice of appointment. The dispute would be decided
based on written pleadings, documents and submissions filed by the parties without any oral
hearing. Oral hearing can be held only if all the parties request or the arbitral tribunal considers it
necessary for clarifying certain issues. There may not be too many occasions where the parties to
an on-going dispute agree on anything, let alone agree on a fast track procedure.

G. A NEW EXPANSIVE COST REGIME INTRODUCED

Section 31A has been introduced which gives wide powers to the arbitral tribunal to award costs.
The expansive regime to award costs based on rational and realistic criterion rule, as
recommended in the Law Commission Report, has been accepted. The arbitral tribunal can
decide whether the costs are payable, the amount of costs to be paid and when they need to be
paid. The provision further provides that generally the unsuccessful party will be ordered to pay
the costs to the successful party. The costs may include fees and expenses of the arbitrators,
courts and witnesses, legal fees and expenses, administrative costs of the institution and any
other costs incurred in relation to the arbitral or court proceedings and the arbitral award. The
conduct of parties is a determining factor in awarding costs including the refusal of a party to
unreasonably refuse a reasonable offer of settlement made by the other party.

H. DISCLOSURE REQUIREMENTS OF ARBITRATOR

The Amendment Act has borrowed the disclosure requirements from the IBA Guidelines on
Conflict of Interest in International Arbitration. The Fifth and Seventh Schedule has been
inserted which provides a guide in determining circumstances for ineligibility of the arbitrator.

I. CAP ON FEES TO ARBITRATOR

41
The Fourth Schedule has been introduced which provides the model fees in case of arbitrations
other than international commercial arbitrations and in cases where parties have agreed to the
rules of an arbitral institution, with a view to ensure that the arbitration process does not become
very expensive.

Section 11A (2) has been introduced which details the procedure for Central Government to
amend the Fourth Schedule. However, since the High Court of each State is required to frame
rules after taking into consideration the rates mentioned in the Fourth Schedule, this may lead to
a disharmonised fee regime62 across the country.

J. OTHER MISSES

i. The Amendment Act also does not clarify if Indian parties can choose foreign law to resolve
disputes through arbitration. While some argue that this is possible since the choice of the party
to determine the choice of law must be recognised; the more conservative argument has been that
Indian parties cannot agree to resolve disputes choosing a foreign law, as that would mean
contracting out of Indian Law, and therefore opposed to public policy.63

The Bombay High Court in the case of Addhar Mercantile Private Limited v. Shree Jagdamba
Agrico Exports Private Limited64 while dealing with this issue, relied on some observations of
the Supreme Court in TDM Infrastructure Private Limited v. UE Development India Private
Limited65 and held that since both the parties are Indian, they cannot derogate from Indian Law
and the choice of two Indian parties to choose foreign law in a foreign seated arbitration was not
recognised. However, the Madhya Pradesh High Court in Sasan Power Limited v. North
American Coal Corporation Limited66 has taken a contrary view. This issue is currently pending
adjudication by the Supreme Court.

ii. In order to provide statutory recognition to the "emergency arbitrator" as provided under some
institutional rules, the Law Commission Report had recommended the addition of "emergency
arbitrator" to the definition of "arbitral tribunal" under Section 2(d) of the Arbitration Act. The
concept of "emergency arbitrator" has been recognised by most international arbitration rules and
has gained popularity for its effectiveness. The recommendations made by the Law Commission

62
Supra Note 3
63
http://www.mondaq.com/india/x/433430/Arbitration+Dispute+Resolution/Whether+Indian+Parties+Can+Choose+
Foreign+Law+To+Settle+Disputes
64
Arbitration Application No. 197 of 2014 along with Arbitration Petition No. 910 of 2013
65
10 (2008) 14 SCC 271
66
First Appeal No. 310/2015
42
Report in this regard have not been accepted and this is a significant omission that is likely to
impact arbitrations in India.

iii. Though the Law Commission Report suggested using the expressions "seat" and "venue"
instead of "place" of arbitration keeping it consistent with international usage of a "seat of
arbitration" to denote the legal home of the arbitration, the proposal has not been accepted.

iv. While, a time limit has been fixed for challenge to a domestic arbitral award, no such time
limit is prescribed for the enforcement of foreign arbitral awards, despite the recommendations in
the Law Commission Report. There cannot be any rationale for this considering the amendments
have been made to make India more arbitration friendly.

v. The Amendment Act does not address the issue of confidentiality in arbitrations.

vi. The Law Commission Report had recommended changes to Section 16 of the Arbitration Act,
to empower the arbitral tribunal to decide disputes that involve serious questions of law,
complicated questions of fact or allegations of fraud, corruption etc. While the provisions of
Sections 8 and 11 have been amended to the effect that the parties will be referred to arbitration
"... Notwithstanding any judgment, decree, or order of the Supreme Court..." perhaps to
overcome the conflicting judgments of the Supreme Court on whether or not questions of fraud
are arbitrable; the recommended changes to Section 16 of the Arbitration Act ought to have been
accepted, to make this position clear and provide more teeth to the powers of the arbitral tribunal.

A two judge bench of the Supreme Court in Radhakrishna v. Maestro

Engineers67("Radhakrishna judgment"), held that issues of fraud are not arbitrable. However, the
Single Judge of the Supreme Court, while deciding a petition under Section 11 of the Arbitration
Act, in Swiss Timing Ltd. v. Organising Committee68, held that judgment in Radhakrishna
judgment is per incuriam and therefore not good law.

In a situation, where the parties are before an arbitral tribunal in a manner other than Sections 8
or 11 of the Arbitration Act, and the arbitrator's jurisdiction is questioned by a party alleging that
there are questions of fraud involved in the dispute, it would appear that the arbitral tribunal may
be bound to follow the Radhakrishna judgment, and consequently rule that it does not have the
jurisdiction to deal with questions of fraud. The better approach could have been to amend
Section 16 consistent with the recommendations made in the Law Commission Report.

67
(2010) 1 SCC 72
68
(2014) 6 SCC 677
43
vii. Section 44(b) requires that the foreign award not only be made in a reciprocating territory,
but also that the reciprocating territory be notified by the Central Government in Official
Gazette. With only about 50 (fifty) countries having been notified as reciprocating territory, the
scope of enforcing foreign arbitral awards is significantly reduced. The Government should
either notify most countries in the Official Gazette, or do away with the requirement of Section
44(b) that provides for notifying reciprocating territories in the Official Gazette.69

viii. Though the Law Commission Report recommended inserting clauses 3A and 3B to Section
7 to provide greater clarity and meaning to the definition of "arbitration agreement", the same
has not been accepted. The Law Commission Report had further recommended adding an
explanation to define "electronic means" which has also not been accepted.

ix. The Arbitration Amendment has created confusion as to whether the amendments will have a
retrospective or prospective effect for court actions concerning arbitration and the arbitration
proceedings. Section 26 of the Amended Act provides that "Nothing contained in this Act shall
apply to the arbitral proceedings commenced in accordance with the provisions of Section 21 of
the principal Act, before the commencement of this Act unless the parties otherwise agree but
this Act shall apply in relation to arbitral proceedings commenced on or after the date of
commencement of this Act".

The Madras High Court in New Tripur Area Development Corporation Limited v. M/s Hindustan
Construction Company Limited & Ors., has ruled that Section 26 of the Amended Act is not
applicable to post arbitral proceedings including court proceedings, since the words "in relation
to" has been deleted. Therefore, the court held that a separate application under the amended law
had to be filed for seeking a stay on the arbitral award even in respect of arbitral awards passed
prior to October 23, 2015.

However, the Calcutta High Court in Electrosteel Casting Limited v. Reacon Engineers (India)
Private Limited, has taken a contrary view and held that the enforcement of arbitral award, borne
out of arbitration proceedings commenced before October 23, 2015, would be stayed
automatically upon the filing of application for setting aside the same.

This is a critical issue and needs to be decided by the Supreme Court at the earliest since the
courts are unsure about which law to follow. This has resulted in inconsistencies in practice and

69
Supra Note 3
44
uncertainty about the law, within just a few months of the introduction of the new arbitration
regime.

4.1 ANALYSIS OF THE JUDGEMENT AFCONS

The judgment itself raises questions. Assuming a petition were filed to challenge an award prior
to the 2015 amendments but was pending on the date of the amendments, by virtue of the
judgment, an automatic stay that was earlier effective would no longer apply. It would then be
open to the award-creditor to apply for enforcement and the award-debtor would have to file a
separate application for a stay (in which case a deposit of the award amount would be probable),
thus taking away a benefit that a party had prior to the 2015 amendments.It remains to be seen
whether the Government takes note of the Supreme Court’s interpretation and effects
amendments in consonance.
The amendments are a welcome development in the field of arbitration and when implemented
will assist further in India being seen as an arbitration friendly jurisdiction. With the growth of
globalization, liberalization regimes and rapid advancement in international business
relationships, it is increasingly pertinent to have a flexible and quick method of resolving
disputes.

International Commercial Arbitration is a preferred process of dispute resolution chosen by

parties, wherein parties intentionally agree to submit their case to a neutral third party and agree
to be bound by his/her decision. Section 2(1)(f) of The Arbitration and Conciliation Act, 1996,
defines an International Commercial Arbitration which 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— (i) An individual who is a national
of, or habitually resident in, any country other than India; or (ii) A body corporate which is
incorporated in any country other than India; (iii) A company or an association or a body of
individuals whose central management and control is exercised in any country other than India;
(iv) The Government of a foreign country The scope of this section was determined by the
Supreme Court in the case of TDM Infrastructure Pvt. Ltd. v. UE Development India Pvt. Ltd1 ,
where in spite of company having a foreign control, the Supreme Court concluded that, “a
company incorporated in India can only have Indian nationality for the purpose of the .When
Arbitration is Deemed to be International In the United Nation Commission on International
Trade Law (UNCITRAL) Model Law, arbitration is deemed to be international if any one of four
different situations is present:
45
Article 1 (3) (a) The parties to the arbitration agreement have, at the time of the conclusion of the
agreement, their places of business in different States. (b) One of the following places is situated
outside the State in which the parties have their places of business: (i) The place of arbitration, if
determined in or pursuant to, the arbitration agreement, is situated outside the State in which the
parties have their places of business (ii) Any place where a substantial part of the obligations of
the commercial relationship is to be performed or the place with which the subject-matter of the
dispute is most closely connected (iii)The parties have expressly agreed that the subject-matter of
the arbitration agreement relates to more than one country. Meaning of Commercial: The word
commercial includes the day to day international business activities that have become part of the
international trade nowadays. In Koch Navigation Inc v Hindustan Petroleum Corp Ltd , it
was held that “liberal construction is to be given to any expression or phrase used in the Act”.

In Atiabari Tea Co. Ltd v State of Assam , it was held that “trade and commerce in India has a
wide meaning.” Applicability of Part 1 of the Act in International Commercial Arbitration:

In Bhatia International v Bulk Trading S.A , it was held that Part I of Arbitration and
Conciliation Act, 1996 would equally apply to International Commercial Arbitrations having seat
outside India, unless any or all the provisions have been expressly excluded. In Bharat
Aluminium v Kaiser Aluminium5 , the Court decided that a constitutional bench of the Court
would reconsider the Court's own ruling in Bhatia International case. The Supreme Court gave
following ruling in the above mentioned case:

1. “Part I not applicable to International Commercial Arbitrations having seat outside India:

Section 2(2) makes a declaration that Part I of the Arbitration Act, 1996 shall apply to all
arbitrations which take place within India. We are of the considered opinion that Part I of the
Arbitration Act, 1996 would have no application to International Commercial Arbitration held
outside India.

2. No Interim Injunction: No suit for interim injunction simplicitor would be maintainable in

India, on the basis of an international commercial arbitration with a seat outside India.

3. Section 9 i.e. Interim Relief cannot be granted if seat is outside India: In our opinion, the
provision contained in Section 2(2) of the Arbitration Act, 1996 is not in conflict with any of the
provisions either in Part I or in Part II of the Arbitration Act, 1996. In a foreign seated
international commercial arbitration, no application for interim relief would be maintainable

46
under Section 9 or any other provision, as applicability of Part I of the Arbitration Act, 1996 is
limited to all arbitrations which take place in India.

4. Law to be applied prospectively: In order to do complete justice, we hereby order, that the law
70
now declared by this Court apply prospectively, to all the arbitration agreements executed
hereafter.” Why Arbitration preferred in solving International Disputes

5. Speedy dispute solving mechanism: Court process involves extensive procedures and rules,
which a party needs to follow. If parties refer their dispute to arbitration, they need not follow
strict procedures of law. Hence, the dispute solving becomes speedy.

6. Enforceability of Arbitral Awards: It is more readily and swiftly enforced as compared to the
court judgements.

7. Arbitrator is impartial: Neutral third party is chosen to decide disputes. This third party is
chosen mutually by both the parties to dispute.

8. Arbitrator chosen may be an expert: based on the issue of dispute, parties may choose a
specific arbitrator having that particular technical experience and expertise in the area disputed.

9. Arbitration less expensive: since arbitration is a time effective remedy and does not involve
too many procedures, it is less expensive as compared to litigation procedures.

4.2 PRINCIPLE OF KOMPETENZ-KOMPETENZ

Section 16 of the Act, again based on Article 16 of the Model Law, is very important in its effect
as it incorporates the doctrines of Kompetenz-Kompetenz (Competence-Competence) and
Severability. In essence, the doctrine of Kompetenz-Kompetenz allows the arbitral tribunal to
rule on matters regarding its own competence. The doctrine of Severability entails that the
arbitral clause would not be vitiated if the contract itself is invalid or defective. The position was
also considerably changed from that espoused by the Arbitration Act of 1940. Earlier, disputes
regarding the validity and existence of the contract had to be dealt with by the courts and not
arbitrators. The only remedy to a party aggrieved by the Tribunal’s ruling on its own jurisdiction
is to apply for setting aside the award in consonance with the section 34 of the Act.

4.3 INTERIM RELIEF IN AID OF ARBITRATION

70
A.I.R 2002 SC
47
Section 9 of the Act, based on Article 9 of the UNCITRAL Model Law, lays down certain cases
wherein parties may approach the appropriate court for certain interim measures. It has been held
that this power of the court may be exercised even before an arbitrator has been appointed,
overruling the earlier position that the power may only be exercised if a request for arbitration
has been made. Further, in a number of judgments 71, the Supreme Court has held that the
principles applicable to grant of interim reliefs under Order XXXVIII and Order XXXIX of the
CPC, i.e. balance of convenience, prima facie cases, irreparable injury, and the concept of just
and convenient shall also govern the grant of interim measures of protection under section 9 of
the Act.

Section 17 of the Act has been identified to be identical in nature to section 9, with the difference
lying in the powers of the courts and arbitral tribunal. Section 9, as we now know, provides
instances where parties can approach the court for certain interim measures. On the other hand,
section 17 vests the power in arbitral tribunals to award such interim measures, providing a
narrower power than that of the courts.

4.3 MODEL CIVIL PROCEDURE ALTERNATIVE DISPUTE RESOLUTION RULES

1996

The 1996 Act and the 1987 Act do not contemplate a situation where the Court asks the parties to
choose one of the ADR mechanism, namely, arbitration, conciliation or through Lok Adalat.
These Acts, thus, are applicable only from the stage after reference is made under Section 89 of
the Code. (Salem Advocates Bar Association v Union of India, AIR 2005 SC 3353).

In view of right to speedy trial being implicit in Article 21 of the Constitution and in order to
provide fair, speedy and inexpensive justice to the litigating public, the Supreme Court has
recommended the High Courts to adopt, with or without modification, the model Civil Procedure
Alternative Dispute Resolution and Mediation Rules framed by the Law Commission of India.
(Salem Advocates Bar Association v Union of India, AIR 2005 SC 3353)

The model Alternative Dispute Resolution Rules framed by the Law Commission lay down the
procedure for directing parties to opt for alternative modes of settlement. The Court is mandated
to give guidance as it deems fit to the parties, by drawing their attention to the relevant factors
which the parties will have to take into account, before exercising their option as to the particular
mode of settlement. The Rules provide for the procedure for reference by the Court to the
M/s Arvind Constructions Co. (P) Ltd. v. Kalinga Mining Corporation, (2007) 6 SCC 798; Adhunik Steels Ltd. v
71

Orissa Manganese and Mineral Pvt. Ltd., (2007) 7 SCC 125

48
different modes of settlement, as also the procedure for the referral back to the Court and
appearance before the Court upon failure to settle disputes by ADR mechanisms. (Salem
Advocates Bar Association v Union of India, AIR 2005 SC 3353).

It is permissible for the High Courts to frame rules under Part X of the Code covering the manner
in which the option to one of the ADRs can be made. The rules so framed by the High Courts are
to supplement the rules framed under the Family Court Act, 1984. (Salem Advocates Bar
Association v Union of India, AIR 2005 SC 3353).

4.3.1 DOMESTIC ARBITRATION

The expression “domestic arbitration” has not been defined in the 1996 Act. An arbitration held
in India, the outcome of which is a domestic award under Part I of this Act, is a domestic
arbitration (Sections 2(2) and 2(7)). Therefore, a domestic arbitration is one which takes place in
India, wherein parties are Indians and the dispute is decided in accordance with substantive law
of India (Section 28(1) (a)).

4.3.2 LIMITED JUDICIAL INTERVENTION

Under the 1996 Act, there is no provision for reference to arbitration by intervention of the
Court. Section 5 of the 1996 Act provides for limited role of judiciary in the matters of
arbitration, which is in consonance with the object of the Act to encourage expeditious and less
expensive resolution of disputes with minimum interference of the Court (P. Anand Gajapathi
Raj v P.V.G. Raju, AIR 2000 SC 1886).

4.3.3 ARBITRATION AGREEMENT

The existence of arbitration agreement is a condition precedent for the exercise of power to
appoint an arbitrator under Section 11 of the 1996 Act. The issue of existence and validity of the
“arbitration agreement” is altogether different from the substantive contract in which it is
embedded. The arbitration agreement survives annulment of the main contract since it is
seperable from the other clauses of the contract. The arbitration clause constitutes an agreement
by itself. (Firm Ashok Traders v Gurumukh Das Saluja, (2004) 3 SCC 155).

In cases where there is an arbitration clause, it is obligatory for the Court under the 1996 Act to
refer the parties to arbitration in terms of their arbitration agreement (Section 8). However, the

49
Act does not oust the jurisdiction of the Civil Court to decide the dispute in a case where parties
to the arbitration agreement do not take appropriate steps as contemplated by Section 8 of the
Act.

Similarly, the Court is to refer the parties to arbitration under Section 8 of the 1996 Act only in
respect to “a matter which is the subject matter of an arbitration agreement”. Where a suit is
commenced “as to a matter” which lies outside the arbitration agreement and is also between
some of the parties who are not parties to the arbitration agreement, there is no question of
application of Section 8. The words “a matter” indicates that the entire subject matter of the suit
should be subject to arbitration agreement. (Sukanya Holdings Pvt. Ltd. V Jayesh H. Pandya,
(2003) 5 SCC 531).

Section 8 of the 1996 Act is attracted to only arbitrable disputes, which the arbitrator is
competent or empowered to decide.

Illustration : The parties agreed to refer the question of winding up a company to arbitration.
However, the power to order winding up of a company is conferred upon the company court by
the Companies Act. As the arbitrator has no jurisdiction to wind up a company, the Court cannot
make such a reference under Section 8. (Haryana Telecom Ltd. v Sterlite Industries (India) Ltd.,
AIR 1999 SC 2354).

Illustration : The parties agreed to refer the question as to whether probate should be granted or
not to arbitration. Since the judgement in the probate suit under the Indian Succession Act is a
judgement in rem, such question cannot be referred to arbitration (Chiranjilal Shrilal Goenka v
Jasjit Singh, (1993) 2 SCC 507).

The application under Section 8 of the 1996 Act can be filed in the same suit or as an
independent application before the same Court.

Ordinarily the application under Section 8 of the 1996 Act has to be filed before filing of written
statement in the concerned suit. But when the defendant even after filing the written statement
applies for reference to arbitration and the plaintiff raises no objection, the Court can refer the

50
dispute to arbitration. The arbitration agreement need not be in existence before the action is
brought in Court, but can be brought into existence while the action is pending. Once the matter
is referred to arbitration, proceedings in civil suit stands disposed of. The Court to which the
party shall have recourse to challenge the award would be the Court as defined in Section 2 (e) of
the Act, and not the Court to which an application under Section 8 is made. (P. Anand Gajapathi
Raju v P.V.G Raju AIR 2000 SC 1886).

Where during the pendency of the proceedings before the Court, the parties enter into an
agreement to proceed for arbitration, they would have to proceed in accordance with the
provisions of the 1996 Act.

Illustration : The High Court, in exercise of its writ jurisdiction, has no power to refer the matter
to an arbitrator and to pass a decree thereon on the award being submitted before it. (T.N
Electricity Board v Sumathi, AIR 2000 SC 1603).

CHAPTER-5 ARBITRAL TRIBUNAL

5.1 JURISDICTION

The arbitral tribunal is invested with the power to rule on its own jurisdiction including ruling on
any objection with respect to the existence or validity of the arbitration agreement. For that
purpose, the arbitration clause shall be treated as an agreement independent of the other terms of
the agreement even though it is part of the said agreement. So, it is clear that even if the arbitral
tribunal decides that the agreement is null and void, it shall not entail ipso jure the invalidity of

51
the arbitration clause. (Olympus Superstructures (P) Ltd. v Meena Vijay Khetan, AIR 1999 SC
2102).

Objections to jurisdiction of the arbitral tribunal must be raised before the arbitral tribunal. If the
arbitral tribunal accepts the plea of want of jurisdiction, it will not proceed further with the
arbitration on merits and the arbitral proceedings shall be terminated under Section 32 (2) (c) of
the 1996 Act. Such decision, however is appealable (Section 37 (2) (a)). In case the tribunal
rejects the plea of jurisdiction, it will continue with the arbitral proceedings and make an arbitral
award, which can be challenged by the aggrieved party under Section 34 (2) of the 1996 Act.
The Court has no power to adjudicate upon the question of the want of jurisdiction of an arbitral
tribunal.

Section 16 of the 1996 Act, however, does not take away the power of Chief Justice in a
proceeding under Section 11 to decide as to whether there is a valid arbitration agreement or not,
before deciding whether the dispute should be referred to the arbitrator for arbitration.
(Wellington Associates Ltd. v Kirit Mehta, AIR 2000 SC1379).

The arbitral tribunal, during the arbitral proceedings, can order interim measure for the
protection of the subject matter of the dispute and also provides for appropriate security in
respect of such a measure under Section 17 of the 1996 Act. Such an order for interim measures
is appealable under Section 37 (2) of the Act.

The power of interim measure conferred on the arbitral tribunal under Section 17 of the 1996 Act
is a limited one. The tribunal is not a Court of law and its orders are not judicial orders. The
tribunal cannot issue any direction which would go beyond the reference or the arbitration
agreement. The interim order may be addressed only to a party to the arbitration. It cannot be
addressed to other parties. No power has been conferred on the arbitral tribunal under this section
to enforce its order nor does it provide for judicial enforcement thereof. (M.D Army Welfare
Housing Organization v Sumangal Services (P) Ltd., AIR 2004 SC 1344).

5.2 CONDUCT OF ARBITRAL PROCEEDINGS

Sections 18 to 27 of the 1996 Act lay down various rules dealing with arbitral procedure. Section
19 establishes procedural autonomy by recognizing parties‟ freedom to lay down the rules of

52
procedure, subject to the fundamental requirements of Section 18 of equal treatment of parties.
Section 20 gives right to the parties to agree on the place of arbitration.

The arbitral tribunal is not bound by the procedure set out by Code. It is for the parties to agree
on a procedure and if the parties are silent, then the arbitrator has to prescribe the procedure.
However, the procedure so prescribed should be in consonance with the principles of natural
justice. The doctrine of natural justice pervades the procedural law of arbitration as its
observance is the pragmatic requirement of fair play in action.

5.3 ARBITRAL AWARD

The award-making process necessarily minimizes the derogable provisions of the 1996 Act and
is mainly concerned with the role of the arbitrator in connection with making of the award
(Sections 28 to 33). Section 28 pertains to the determination of the rules applicable to the
substance of the disputes. Section 29 provides the decision-making procedure within the tribunal.
Section 30 relates to settlement of a dispute by the parties themselves and states that with the
agreement of the parties, the arbitration tribunal may use mediation, conciliation and other
procedures at any time during the arbitral proceedings to encourage settlement. Section 31 refers
to the form and contents of arbitral award. Unlike the 1940 Act, the arbitral award has to state
reasons upon which it is based unless the parties have agreed that no reasons are to be given or
the award is an arbitral award on agreed terms under Section 30. Section 32 pertains to the
determination of the arbitral proceedings, while Section 33 relates to the corrections and
interpretation of an award as also to making of additional awards.

5.4 RECOURSE AGAINST ARBITRAL AWARD

Section 34 of the 1996 Act provides for recourse against the arbitral award. The limited grounds
for setting aside an arbitral award are

(a) incapacity of party.

53
 (b) invalidity of agreement.

(c) absence of proper notice to the party.

(d) award beyond scope of reference.

(e) illegality in the composition of arbitral tribunal or in arbitral procedure.

(f) dispute being non arbitrable.

(g) award being In conflict with public policy.

Section 34 of 1996 Act is based on Article 34 of the UNCITRAL Model law. The scope for
setting aside the award under the 1996 Act is far less than that under Sections 30 or 33 of the
Arbitration Act, 1940. (Olympus Superstructures (P) Ltd. v Meena Vijay Khetan, AIR 1999 SC
2102).

The arbitrator is the final arbiter of a dispute between the parties and it is not open to challenge
the award on the ground that the arbitrator has drawn his own conclusions or has failed to
appreciate the facts. (Sudershan Trading Co. v Government of Kerala, AIR 1989 SC 890).

The arbitrator is the sole judge of the quality and quantity of evidence and it will not be for the
Court to re-appreciate the evidence before the arbitrator, even if there is a possibility that on the
same evidence, the Court may arrive at a different conclusion than the one arrived at by the
arbitrator (M.C.D. v Jagan Nath Ashok Kumar, (1987) 4 SCC 497). Similarly, if a question of
law is referred to the arbitrator and he gives a conclusion, it is not open to challenge the award on
the ground than an alternative view of the law is possible (Alopi Parshad & Sons Ltd v Union of
India, (1960) 2 SCR 793).

54
The power of the arbitral tribunal to make an award is different from its power to issue
procedural orders and directions in the course of the arbitration proceedings. Such orders and
directions are not awards and hence are not open to challenge under Section 34 of the 1996 Act,
though they may provide basis for setting aside or remission of the award. For instance,
questions concerning the jurisdiction of the arbitral tribunal or the choice of the applicable
substantive law are determinable by arbitral process resulting in an award. On the other hand,
questions relating to the admissibility of evidence or the extent of discovery are procedural in
nature and are determinable by making an order or giving a direction and not by an award.

In view of the principles of acquiescence and estoppel, it is not permissible for a party to
challenge an arbitration clause after participating in arbitration proceeding.

Illustration: Where a party consented to arbitration by the arbitral tribunal as per the arbitration
clause and participated in the arbitral proceedings, it cannot later take the plea that there was no
arbitration clause (Krishna Bhagya Jala Nigam Ltd. V G Hari’s Chandra Reddy, (2007) 2 SCC
720).

However, the principle of acquiescence is inapplicable where the arbitrator unilaterally enlarges
his power to arbitrate and assumes jurisdiction on matters not before him.

Illustration : The parties, by express agreement, referred to arbitration only the claims for refund
of the hire charges. The arbitrator, upon entering into the reference, enlarged its scope. Since the
arbitrator continued to adjudicate on such enlarged dispute, despite objections, the parties were
left with no option, but to participate in the proceedings. Such participation did not amount to
acquiescence. Once appointed, the arbitrator has the duty to adjudicate only the matter brought
before it by the parties. The award is liable to be set aside as the arbitrator had misdirected
himself and committed legal misconduct. (Union of India v M/s G. S. Atwal, AIR 1996 SC
2965).

55
The Court to which the party shall have recourse to challenge the award would be the Court as
defined in Section 2(1)(e) of the 1996 Act and not the Court to which an application under
Section 8 of the Act was made (P. Anand Gajapathi Raju v P.V.G Raju, AIR 2000 SC 1886)

5.5 FINALITY AND ENFORCEMENT OF AWARDS

Section 35 of the 1996 Act provides that subject to the provisions of Part I of the Act, an arbitral
award shall become final and binding on the parties claiming under them respectively. The word
„final” with respect to an award, as used in this section, is not to be confused with the expression
„final award‟. The word „final‟ means that unless and until there is a successful challenge to the
award, it is conclusive as to the issues with which it deals as between the parties to the reference
and persons claiming under them. The award can, therefore, be enforced, even if there are other
issues outstanding in the reference.

Section 36 of the 1996 Act renders an arbitral award enforceable in the same manner as if it were
a decree, if no challenge is preferred against it within the time prescribed for making a challenge
or, when upon a challenge being preferred, it has been dismissed. However, the fact that an
arbitral award is enforceable as if it were a decree does not make the arbitral proceedings a suit.

The arbitral award becomes immediately enforceable without any further act of the Court once
the time expires for challenging the award under Section 34 of the 1996 Act. If there were
residential doubts on the interpretation of the language used in Section 34, the scheme of the
1996 Act would resolve the issue in favor of curtailment of the Court‟s powers by the exclusion
of the operation of Section 5 of the Limitation Act (Union of India v Popular Constructions,
(2001) 8 SCC 470)

When the arbitration proceedings commenced before the 1996 Act came into force but award
was made after the 1996 Act came into force, the award would be enforced under the provisions
56
of Arbitration Act, 1940. (Thyssen Stahlunion Gmbh v Steel Authority of India, (1999) SCC
334).

5.6 INTERNATIONAL COMMERCIAL ARBITRATION AND FOREIGN AWARDS

An “international commercial arbitration” has been defined in Section 2(f) of the 1996 Act to
mean an arbitration relating to disputes arising out of legal relationships considered commercial
under the law in force in India and where atleast one of the parties is

(a) a foreign national or an individual habitually resident outside India

(b) a body corporate incorporated outside India

(c) a company or association of individuals whose central management and control is

exercised by a country other than India

(d) the Government of a foreign country

The law applicable may be Indian law or foreign law depending upon the contract (Section 2(1)
(f) and Section 28(1)(b)).

Part I of the 1996 Act is to also apply to international commercial arbitrations which take place
out of India, unless the parties by agreement, express or implied, exclude it or any of its
provisions. The definition of international commercial arbitration in Section 2(1)(f) of the 1996
Act makes no distinction between international commercial arbitration held in India or outside
India. Part II of the 1996 Act only applies to arbitrations which takes place in a convention
country. An international commercial arbitration may, however, be held in a non-convention
country. The 1996 Act nowhere provides that the provisions of Part I are not to apply to
international commercial arbitrations which take place in a non-convention country. The very

57
object of the Act is to establish a uniform legal framework for the fair and efficient settlement of
disputes arising in international commercial arbitrations. (Bhatia International v Bulk Tradings,
AIR 2002 SC1432).

Illustration : Even if in terms of the arbitration agreement, the arbitration proceedings between
two foreign parties were being held under I.C.C Rules outside India, yet a party to the arbitration
proceedings may seek an interim injunction under Section 9 of the Act against Oil and Natural
Gas Commission, a Government Company, for restraining it making any payment to the opposite
party till the arbitration proceedings pending between the parties is not concluded. Such
injunction in respect of the properties within territory of India is maintainable. However, if the
injunction is sought for properties outside the country, then such an application under Section 9
is not maintainable in Indian Court. (Olex Focas Pty. Ltd. V Skodoecport Co. Ltd., AIR 2000
Del. 161).

Part II of the 1996 Act pertains to the enforcement of certain foreign awards and consists of two
chapters. Chapter I relates with New York Convention Awards which are supplemented by the
First Schedule to the 1996 Act. Chapter II refers with Geneva Convention Awards which is to be
read with the Second and the Third Schedule of the Act.

The expression “foreign award” which means an arbitral award on differences between persons
arising out of legal relationship considered as commercial under the law in India. An award is
„foreign‟ not merely because it is made on the territory of a foreign state but because it is made
in such a territory on an arbitration agreement not governed by the law of India. (NTPC v Singer
Company, AIR 1993 SC 998).

A foreign award given after the 1996 Act came into force can be enforced only under Part II of
1996 Act, there being no vested right to have the same enforced under the Foreign Awards
(Recognition and Enforcement) Act, 1961. It is relevant that arbitral proceedings had
commenced in the foreign jurisdiction before the commencement of the 1996 Act. (Thyssen
Stahlunion Gmbh v Steel Authority of India, (1999) SCC 334).
58
CHAPTER- 6 MEDIATION

5.1 DEFINITION AND CONCEPT

Mediation is a voluntary, disputant-centred, non binding, confidential and structured process

controlled by a neutral and credible third party who uses special communication, negotiation and
social skills to facilitate a binding negotiated settlement by the disputants themselves. The result
of the mediation agreement is a settlement agreement, and not a decision.

The Black’s Law Dictionary defines mediation as a method of non binding dispute resolution
involving a neutral third party (mediator) who tries to help the disputing parties to reach a
mutually agreeable solution.72 Thus mediation is nothing but facilitated negotiation73 by a third
party who assists the parties in moving towards an acceptable resolution. Mediation is, however,
a structured process and involves different stages viz. introduction, joint session, caucus,
agreement, etc.74

The mediator has no authority to make any decisions that are binding on the parties, but uses
certain procedures, techniques and skills to help them to negotiate an agreed resolution of their
dispute without adjudication.75 His role is primarily that of a facilitator and he focuses on
effective communication and negotiation skills76 and drives the parties towards a self determined
solution. If successful, mediation culminates into a settlement agreement acceptable to the
parties.

In India there is no comprehensive legislation on mediation, however section 89 of the Code of

Civil Procedure, 1908 distinctly recognizes mediation as an available ADR mechanism.77

72
Bryan A. Garner (Ed.), Black’s Law Dictionary 1003 (West Publishing Company, St. Paul,
Minnesota, 8th Edn., 2004)..
73
Tom Arnold, “Mediation Outline : A Practical How-to Guide for Mediators and Attorneys” in
P.C. Rao and William Sheffield (Eds.), Alternative Dispute Resolution 210 (Universal Law
Publishing Company Pvt. Ltd., Delhi, 1997).
74
See also H.E. Chodosh, N.J. Bhatt, F.Kassam, Mediation in India: A Toolkit (U.S.
Educational Foundation in India, Fulbright House, New Delhi, Feb. 2004); See also Delhi High
Court Mediation and Conciliation Centre, Mediator’s Tool Box (Volume I).
75
See Henry J. Brown and Arthur L. Mariot, ADR Principles and Practice (Sweet & Maxwell,
London, 2nd Edn.,1997)..
76
Joanne Goss, “An Introduction to Alternative Dispute Resolution”, 34 (1) Alta. L. Rev. 1
(1995) (Can.).
77
Ashwanie Kumar Bansal, Arbitration and ADR 19 (Universal Law Publishing Co. Pvt. Ltd.,
Delhi, 2005).
59
The focus in mediation is on the future with the emphasis of building relationships, rather than
fixing the blame for what has happened in the past. The purpose of mediation is not to judge
guilt or innocence but to promote understanding, focus the parties on their interests, and
encourage them to reach their own agreement. The ground rules of mediation include

Neutrality : the mediator should be neutral having no interest with the dispute or either party.

Self determination : mediation is based on the principle of the parties‟ self-determination, which
means each party makes free and informed choices. The mediator is, therefore, responsible in the
conduct of the process while the parties control the outcome.

Confidentiality : it is of the essence of successful mediation that parties should be able to reveal
all relevant matters without an apprehension that the disclosure may subsequently be used
against them as well. Were the position otherwise, unscrupulous parties could use and abuse the
mediation process by treating it as a gigantic, penalty free discovery process. The mediator must
state to the parties

 that he and the parties shall keep confidential all matters relating to the mediation
proceedings, and that confidentiality shall extend also to the settlement agreement, except
where its disclosure is necessary for the purposes of its implementation and enforcement.

 that unless otherwise agreed by the parties, it would be legally impermissible for him to
act as an arbitrator or a witness in any arbitral or judicial proceeding in respect of the
dispute that is the subject of mediation proceedings and that the parties are not allowed to
introduce such evidence – neither on facts (like the willingness of one party to accept
certain proposals) nor on views, suggestions, admissions or proposals made during the
mediation.

 that the only behavior that might be reported is the information about whether parties
appeared at a scheduled mediation and whether or not they reached a solution.

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Fair process : the process is just as important as the outcome. It is crucial that parties feel they
are being treated fairly and their concerns are being heard.

Voluntary process : mediation is possible only with consent of parties, who get bound once they
sign the settlement arrived at during mediation.

6.2 PRE-MEDIATION PREPARATION

The mediator often asks for a pre-mediation summary from the parties to familiarize himself
with the dispute. The participants during mediation need not necessarily be only the actual
disputants but all parties that could facilitate or block a settlement.

In preparing the case, it will be useful for the mediator and/or the parties to analyze the dispute.
In doing so, the mediator must be conversant with the applicable law and practice, the
perspective of both sides on the facts and the issues that are of most concern to either party.

6.3 DEMEANOR OF THE MEDIATOR

The mediator should try to establish his neutrality and control over the process by maintaining
neutral body language; using neutral, plain and simple words; using words of mutuality that
apply to all parties; having appropriate eye contact; using calm, moderate, business like and
deliberative tone and having a attentive posture. Importance must be given to seating
arrangement so as to ensure closeness, eye contact and audibility.

6.4 MEDIATION TECHNIQUES

Mediation is all about transforming conflicts. The mediator must take the sting out of the
hostility between the parties. The mediator could use the technique of neutral reframing to
rephrase an offensive or inflammatory statement of a party in an inoffensive manner by focusing
on the positive need in that statement

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Illustration :. Party : He is so dominating that he never talks to me, forcing me to keep
everything bottled up.

Mediator : You would like to be heard

The mediator has thus not only converted the negative statement into a positive one, he has
exposed the other party to the positive need (of being heard) underlying the statement. Other
mediation techniques listed by commentators are

 summarizing : the mediator restates the essence of the statement of the party briefly,
accurately and completely

 acknowledgement : the mediator reflects back the statement of a party in a manner that
recognizes that party‟s perspective.

 re-directing : the mediator shifts the focus of a party from one subject to another in order
to focus on details or respond to a highly volatile statement by a party.

 deferring : the mediator postpones a response to a question by a party in order to follow

an agenda or gather additional information or defuse a hostile situation.

 setting an agenda : the mediator establishes the order in which the issues, positions or
claims are to be addressed.

 handling reactive devaluation : the mediator takes ownership of an information or

statement of a party in order to pre-empt the other party from reacting negatively to such
information or statement solely based on the source of the information.

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The mediator should endeavor to shift from positions to interests by

 talking to the parties to uncover their long term interests, and in the process, discover
interests common to the parties.

 using open questions to elicit more facts.

 inviting options again from the parties for settlement.

 putting all settlement options, no matter how ostensibly insignificant, on the table.

 examining each options one by one as any given option might just appeal to a party on
deeper analysis.

 do reality check by comparing a pending offer with

 the best result a party can get in litigation (BATNA or best alternative to a negotiated
agreement).

 the worst result a party can get in litigation (WATNA or worst alternative to a negotiated
agreement).

 the most likely result a party can get in litigation (MLATNA or most likely alternative to
a negotiated agreement).

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CHAPTER-7 RULES AND STAGES OF MEDIATION

7.1 MODEL CIVIL PROCEDURE MEDIATION RULES 2003

While there is no comprehensive statute governing mediation in India, the Supreme Court has
recommended the High Courts to adopt, with or without modification, the model Civil Procedure
Mediation Rules framed by the Law Commission of India. (Salem Advocates Bar Association v
Union of India, AIR 2005 SC 3353).

The Rules provide for the procedure for appointment of a mediator, the qualifications of the
mediator and procedure for mediation. Rule 12 provides that the mediator is not bound by the
Evidence Act 1872 and the Code, 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 16 describes the role of mediator and states that the mediator shall attempt to
facilitate voluntary resolution of the dispute by the parties, and communicate the view of each
party to the other, assist them in identifying issues, reducing misunderstandings, clarifying
priorities, exploring areas of compromise and generating options in an attempt to resolve the
dispute, emphasizing that it is the responsibility of the parties to take decision which affect them;
he shall not impose any terms of settlement on the parties.

Rule 17 emphasises that the parties alone responsible for taking decision and that the mediator
will not and cannot impose any settlement or give any warranty that the mediation will result in a
settlement. The Rules have strict provisions with regard to the confidentiality of the mediation
process. While Rule 11 enables the mediator to meet or communicate with each of the parties
separately, Rule 20 restrains the mediator from disclosing to the other party any information
given to him by a party subject to a specific condition that it be kept confidential, and mandates
the mediator and the parties to maintain full confidentiality in respect of the mediation process.
The Rule 20 further requires the parties not to rely on or introduce the said information in any
other proceedings as to

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  views or admissions expressed by a party in the course of the mediation proceedings

 confidential documents, notes, drafts or information obtained during mediation

 proposals made or views expressed by the mediator

 the fact that a party had or had not indicated his willingness to accept a proposal for
settlement.

Rule 21 limits the communication between the mediator and the Court to informing the Court
about the failure of a party to attend and, with the consent of the parties, his assessment that the
case is not suited for settlement through mediation or that the parties have settled their disputes.

Rule 24 provides for the reduction of the agreement between the parties into a written settlement
agreement duly signed by the parties. The settlement agreement is to be forwarded to the Court
by the mediator with a covering letter. The Court would pass the decree in terms of the
settlement under Rule 25. Should the settlement dispose of only certain issues in the suit which
are severable from the other issues, the Court may pass decree straightaway in accordance with
the settlement on those issues without waiting for a decision of the Court on the other issues
which are not settled. If the issues are not severable, the Court shall wait for the decision of the
Court on the other issues which are not settled.

Rule 27 lays down ethical standards of a mediator, stating that he should follow and observe the
Rules strictly and diligently.

 not carry on any activity or conduct which could reasonably be considered as conduct
unbecoming of a mediator.

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 uphold the integrity and fairness of the mediation process.

 ensure that the parties involved in the mediation and fairly informed and have an
adequate understanding of the procedural aspects of the process.

 satisfy himself that he is qualified to undertake and complete the mediation in a

professional manner.

 disclose any interest or relationship likely to affect impartiality or which might seek an
appearance of partiality or bias.

 avoid, while communicating with the parties, any impropriety or appearance of

impropriety.

 be faithful to the relationship of trust and confidentiality imposed in the office of

mediator.

 conduct all proceedings related to the resolutions of a dispute, in accordance with the
applicable law.

 recognize that the mediation is based on principles of self-determination by the parties

and that the mediation process relies upon the ability of parties to reach a voluntary
agreement.

 maintain the reasonable expectations of the parties as to confidentiality, refrain from

promises or guarantees of results

7.2 STAGES OF MEDIATION

1. INTRODUCTION

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A Mediator introduces himself and the parties and explains the process of mediation. For
instance where an Advocate is assisting a party and he/she has also brought some of
his/her relations for the negotiation, the Mediator has to explain the role, which can be
played by the Advocate and the relation/friend who has been brought in by the party. The
Mediator must dispel the doubts in the mind of any of the party that a lawyer or a relation
cannot participate in the mediation.

(i) Establish Neutrality: It is very important for the Mediator to exhibit his neutrality to
the parties and the dispute. This can be done by very carefully using appropriate words,
body language and making appropriate eye contact that shows equal treatment to the
parties. A Mediator should sit squarely and by his conduct should not show any
preference to one or the other side of the table undue eye contact to be avoided. A
Mediator should avoid wishing the disputing parties or their Advocates in the waiting
area before the first meeting, even if either of the parties is known to him or her because
this may give a wrong signal to the opposite party. Of course, the Mediator must disclose
any previous contact with any particular party but that can be done while explaining the
process of mediation. A Mediator must always avoid calling a party by the first name
because the opposite party may misconstrue it.

A Mediator should prefer to use neutral terms. For example, in a suit for breach of
contract for supply of certain goods, the Mediator can describe it as a dispute with regard
to a contract for supply of said goods instead of a case of breach of contract. Similarly, a
suit for damages can be better described as a suit for compensation.

A Mediator should also show neutrality with regard to the date, venue and timing of
mediation. If a Mediator asks for the convenient date from one of the parties, the other
party may misconstrue it. Therefore, a Mediator can fix a date either as per his own diary,
subject to the convenience of the parties, or can ask both the parties simultaneously to
suggest a date and time which may be convenient to both of them.

(ii) Describe the Role of a Mediator: A Mediator must tell the parties that his role is simply
to assist them to come to a settlement which may be acceptable to all of them. Thus, his
role is only facilitative and is not to decide the dispute between the parties. He should
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 avoid early evaluation of the dispute even if requested by either of the parties by telling
them that he is yet to get the complete information.

(iii) Address Confidentiality: A Mediator must explain to the parties/participants that

the mediation proceedings are confidential so that they may feel more comfortable in
giving their options towards resolution of dispute. A Mediator can draw the attention of
the parties to the statute or the rules or the agreement whereby the proceedings are
confidential. A Mediator should also tell the parties that they can disclose any
confidential information during a caucus (private meeting) to be kept secret by the
Mediator from the opposite party for coming to a settlement which may be acceptable to
all the parties.

(iv) Establish a Conducive Environment and Control over the Process: A Mediator
should be calm and relaxed during the mediation. He should be in complete control of the
proceedings and should diplomatically handle any interruption without giving an
indication to any party that he/she is not being given adequate attention.

While a Mediator is delivering the introduction or if one of the parties is presenting his or
her point of view and the other party interrupts, a Mediator can request the said party to
make a note of the point and that he (the Mediator) would be getting back to him in just a
short while.

(v) Generate a Momentum Towards an Agreement: A Mediator should develop a

positive frame of mind in the parties by expressing hope that if we work on the dispute,
we may be able to come to a settlement which we would normally come to through hard
work.

(vi) Ground Rules: Take an assurance that each and every party has to respect each other
during the proceedings. One party shall not interrupt the other in the proceedings.

(vii) Determine whether the Mediation Process has been Understood: Enquire from
the parties if they have any question or any doubt about the mediation process.

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 2. JOINT SESSION

Mediator’s Goals
 Gather information about factual background.
 Learn about parties’ claims, defence, arguments and positions.
 Gather information about parties’ underlying interests.

 Manage interaction between parties.

 Maintain environment that is conducive to constructive negotiations.
 Elicit information by k each party if he / she has got any other point.
 Allow parties to give full information of facts

 Joint session to be done coolly and not to rush through - because both the parties will
come to know of the stand of the respective parties in full view and this will enable the
Mediator during negotiation in a separate session.

 Remain neutral - Do not give any idea to any party about the merits and demerits of a
case.

Mediator’s Dos & Donts

 Active listening - A good Mediator is a very active listener.

 Ask questions that bring out desired information (open-ended, clarifying closed questions
that bring out underlying interests, fact-based questions, etc.)

 Manage outbursts and interruptions with acknowledgment. Acknowledge the point of feeling.
 Don't jump to conclusion.
 Don't rush to find a solution.

 Understand that, for most people, their perceptions equal their reality. To them, their
perception is a fact.

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 Understand that two people can perceive a situation differently and they can both be right.
 Let go of your desire to talk.
 Be careful in note taking.
 Be mindful of your body language and the speaker's body language.
 Minimize interruptions.

3. CAUCUS or SEPARATE SESSION

Purpose: In caucus parties get the chance to vent out their charged up feelings and emotions.
A Mediator should not talk negative about any party. It often happens that a novice mediator
starts taking sides and has sympathy with the parties, which is not conducive to the mediation
process and ultimately embarrasses the Mediator.

 A Mediator explains confidentiality to the extent requested. Parties may discuss

confidential information and issues.

 Gather information by asking more questions – Number of separate sessions will depend
from case to case.
 Parties are encouraged to invent settlement options.
 Possibility to settle the case to be enquired from the parties.

 Strong on facts, soft on parties. (For example in a compensation case, a Mediator can ask
the question “Do you have the medical bills?” (Defendant has raised the question of an
exaggerated bill)“Do you have any other document” (Never tell a party that he cannot be
believed and that if he had received the treatment he must be in possession of the bills or
documents)

Agreement:

 Orally confirm a settlement in a separate session with the parties.

 Write down the terms of the settlement.

 Confirm the settlement in a joint session with both the parties.

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 Who can draft agreement, parties, their Advocates or the Mediators?
 To be signed by the parties.

 Terms of Agreement - Clear, complete, concise, specific (give date) preferably in active
voice.

Closing Comments:
It has been noticed that whenever the parties take an adjournment to draft the agreement as
per the terms settled during mediation, there has been a rethinking on the part of one or the
other party to gain some more advantage. Experience has also shown that in some cases the
agreement has failed. Even if an adjournment has to be granted, it should be preferably
scheduled on the next day or in a couple of days – try to draft the agreement yourself but at
the same time make sure about the provisions of law.

7.3 APPROACHES TO NEGOTIATIONS

There are two types of approaches to negotiations, that is, competitive and cooperative. A
competitive negotiator may be aggressive, hostile, uncompromising while a cooperative
negotiator may be accommodating, straightforward and courteous. A good negotiator mixes
these approaches according to the circumstances of the negotiations. If a negotiator is too
docile, he may not get a good bargain.

Types of Bargaining Used in Mediation

Rights-based Bargaining: It is a customary and traditional form of bargaining in which the

parties’ primary focus is on right and wrong (for example, who violated the statute, who
breached the contract, who was negligent). It is blame- oriented analysis.

Positional Bargaining: It is also a customary and traditional form of bargaining, in which

the parties focus on their legal positions and offer to settle. It is often combined with right
based bargaining (for example my client’s claim is worth Rs.1 lakh as your client was 100%
at fault for injuries).

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Distributive Bargaining: This type of bargaining focuses on the allocation of fixed or
limited resources between the parties. It is often referred to as “dividing the pie”, where the
“pie” represents a fixed amount of money, property, assets, etc. (For example, the assets of
an estate). Distributive bargaining is also referred to as “zero sum” bargaining, because for
each amount of resources received by one party, the other party loses the same amount. (Suit
for partition, petition for grant of probate of Will, suit for dissolution of partnership and
rendition of accounts etc. would come under distributive bargaining).

Integrative Bargaining: In this type of bargaining, a Mediator expands the resources that
are the subject of negotiations by introducing the possibility of traditional additional
resources that are outside the framework of initial negotiations. (For example, 18th camel,
that is 1/2, 1/3rd and 1/9th of the camels).

Interest-based Bargaining: In interest based bargaining, the focus shifts from law to the
facts and underlying interests of the parties to develop terms of settlement that produce
mutual gains (for example division of orange). It is a three-step process in which a Mediator

(a) identifies the underlying interests of the parties, (b) prioritizes their interests (using
information generated from the parties), and (c) develops settlement terms that promote the
most important interests of the parties.

Interest based versus Right based Bargaining

A commercial mediation or even compensation mediation normally starts on the basis of
right-based mediation. Like the plaintiff may have filed a suit for recovery of damages
amounting to Rs. 1 lakh but he may be ready to accept Rs. 50,000/- as a settlement. The
right-based bargainer may sometimes bring the mediation to an impasse and the Mediator
must cleverly move towards interest based bargaining in order to save mediation.

Communication Technique Used in Mediation

Restatement: Restatement is a communication tool used frequently by the mediators to ensure
that the mediator has accurately heard their statements. As the name suggests, restatement
consists or mediators repeating of a party's point(s), at times using same or similar words as
the party.This technique gives the party confidence that the mediator has accurately heard
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the party and noted the party's point. Restatement usually focuses on statement made by a
party about facts, law and position.
Example :
Party : “I am not at fault because I delivered the product on time on June 16, 2006”

Mediator : Your position is that you are not liable because you carried out the terms of
agreement by delivering the product on June 16, 2006.

Reflection: Reflection is a communication technique that is similar to restatement, except that

reflection involves a mediator repeating of a party's statement about thoughts, feeling and
emotions.
Example
Party : “I am frustrated because the other party delayed payment of the money I gave to him.”
Mediator: “If I am hearing your correctly, you are frustrated about the timing of payment.”

Summarizing: “Summarizing” is a technique used by a Mediator to briefly, clearly, and

accurately re-state the essence of statements by a party or advocate regarding issues,
positions, or proposed terms of settlement.

- In summarizing, a Mediator must be careful to:

- Be accurate
- Be brief
- Re-state the issues, positions, or terms in words that are neutral
- Be complete

Neutral Re-Framing: Neutral re-framing is the restatement by a Mediator, in neutral words,

of a comment or position expressed by a party or his or her advocate. Using neutral re-
framing, a Mediator attempts to extract the essential content of a statement, leaving out
inflammatory or highly charged words. The Mediator’s restatement is usually made for the
purpose of re-phrasing the comment in terms that are clear and inoffensive. Neutral re-
framing also may be used to focus the parties’ attention on a particular aspect of the
statement or position offered by a party.
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 Neutral re-framing may be used in a variety of situations:
- When a party or advocate makes a statement that is highly adversarial
- When a party or advocate uses words that are inflammatory
- When a party or advocate engages in a personal attack on another person

For instance, in a suit for recovery of Rs. 10 lakhs, the defendant may say in a caucus that he
shall not pay a penny over and above Rs. 5 lakhs and he can see the plaintiff in Court. A
Mediator can reframe the offer by removing the word “not a penny” and “over and above”
and that “he can see the plaintiff in Court”.

Re-Directing: “Re-directing is a communication technique used by a Mediator to shift the focus

of a party from one subject to another. Re-directing may be used to:

- Focus on details.
- Re-focus on general issues, party expectations or goals.
- Respond to a hostile, inflammatory, or highly adversarial statement by a party or attorney.

Setting an Agenda: “Setting an agenda” is a communication technique used by a mediator to

establish the order in which issues, positions, claims, defences, or proposed settlement terms
will be addressed. Setting an agenda may be used to :

- Organize information.
- Determine the priority and relative importance of issues to a party.

Deferring: “Deferring” is a communication technique used by a Mediator to postpone a

response to a question or statement by a party. It may be used in the following situations:

- Where a party or his or her advocate requests a premature evaluation. (It is too early, yet
to get full facts).

- To follow an agenda established by the Mediator.

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- To gather additional information.
- To de-fuse hostile, inflammatory, or highly adversarial statement.
- To break an impasse.

Acknowledgment: “Acknowledgment” is a communication technique used by a Mediator to

reflect back a person’s statement or position, in a manner that recognizes the perspective of
the party who expressed the statement or position. One purpose of acknowledgment is to
convey that the Mediator has accurately heard and understood the statement/position.
Another purpose of acknowledgment is to convey that the Mediator understands the
importance of the statement/position of the party.

Empathy without Reinforcement: Often, it is a Mediator's responsibility to express

understanding and empathy, without expressing agreement or disagreement with a party.
Words and phrases that express empathy without reinforcement include;

- I understand your position.

- I see what you are saying.
- I hear your point.

Words and phrases that, if used improperly or over-used, may lead a party to believe a
Mediator agrees with him / her include:

- Yes
- Okay
- Uh-huh

- Silence (for example, after a party says, “Anybody would do the same thing under the
circumstances”)

In addition, certain gestures and body movements may convey agreement, including nodding
the head up and down.

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Finally, passive information gathering by a Mediator may convey the impression to the speaker
that the Mediator agrees with the party's comments (for example, allowing another person to
have complete control of the agenda, scope, and degree of detail when relating factual
background and positions).

Use of Apology in Mediation :Sometimes apology plays a very important role in resolution of a
dispute between two warring parties A plaintiff may be hurt on account of an unreasonable
conduct of the defendant taking the matter to the Court. The Mediator, therefore, has to use
his/her intuition to find out if it would be helpful if one or both sides make an apology. The
timing and sincerity of apology is crucial.

For instance, in a suit for damages in a motor vehicle accident or in a criminal case under
Section 279/338 IPC, the plaintiff may be having a grievance that the defendant had fled the
spot after the accident and had not even cared to take him to the hospital. The apology in
addition to some compensation may prove very vital in settlement of the dispute.

An insincere apology, however, is worse than none at all. As a practical matter a mediator
should never suggest an apology to the plaintiff without having already confirmed with the
defendant that one is available and would be made if the plaintiff is happy.

Disputes where Mediation is Appropriate

- Parties desire a negotiated outcome
- Parties have an on-going relationship (family, business, other)
- Merits of case make a favourable judgment unlikely
- Litigant does not want to appear as a witness
- Costs of trial exceeds projected value of the case
- Parties want prompt resolution
- Parties want control over the outcome
- Opportunity to develop creative non-traditional remedies.
- Confidentiality/Privacy is desired by the parties.

Disputes where Mediation is not Appropriate

- Parties refuse to negotiate
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- Parties want a judicial determination
- Parties want public airing of the dispute
- Parties want to establish legal precedent
- Delay in resolution benefits party
- Parties do not have sufficient information.

- Where an order of Court is necessary to enforce a right.

- Serious criminal offences.
- Cases which are prohibited from being settled through ADR, such as tax disputes.

Types of Disputes which can be Referred for Mediation

- Family Disputes (divorce, custody, visitation)
- Commercial disputes
- Dispute between neighbors (boundary disputes, noise, animal control)
- MACT/Insurance claim
- Copyright, Trademark disputes
- Billing disputes with public sector companies

Why Should Business Community Consider Mediation?

Mediation is very effective when there is a question of reputation of a big company involved
in any dispute. For instance, there may be presence of some foreign substance in a bottle of
soft drink. The soft drink company in order to avoid any adverse publicity would never like
the dispute to go to the court and would try to settle the dispute to control rumors about the
product.

 A dispute between the employees and a business house and between a contractor and the
business house are also best settled in mediation in order to avoid disruption in the
work/business and in order to maintain the continuing relationship.

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7.4 LOK ADALATS AND PERMANENT LOK ADALATS

Lok Adalats meaning ‘People’s Courts’ are ADR fora where the Lok Adalat Judge steers the
disputant parties towards a negotiated settlement by the use of the generic process of
conciliation. Lok Adalats can dispose of the matter only on the basis of settlement and
compromise and such settlement gets crystallized in the form of the award of the Lok Adalat,
which is final and is executable as a decree of the court. Lok Adalats have statutory recognition
under the Legal Services Authorities Act, 1987.

Lok Adalats have proved to be extremely efficacious in Delhi for disposal of simple
straightforward cases such as complaints under section 138 of the Negotiable Instruments Act,
bank recovery suits, electricity disputes, motor accident claim cases, traffic challans, etc.,
although they may not prove to be the most apposite ADR mechanism for resolution of complex
cases such as partition suits, family disputes, complex commercial cases, matrimonial disputes,
etc. The prime reasons for the same are availability of limited time with the Lok Adalat judges,
heavy cause lists, lack of continuous personalized attention, want of confidentiality, limited
number of sittings (sometimes only one) with the same Lok Adalat Judge, etc.

However despite these limitations Lok Adalats are extremely popular ADR fora in Delhi and are
regularly organized by DLSA at the district court level and by DHCLSC at the Delhi High Court
level in the form of continuous Lok Adalats, special Lok Adalats, mega Lok adalats etc.

Lok Adalats in Delhi have disposed of thousands of cases and have helped a lot in clearing
judicial dockets. Their efficacy can be appreciated from the example that from 01.04.2007 to
31.03.2008 the Lok Adalats in Delhi disposed of more than 1,29,000 cases at the Delhi district
courts. To cite another instance, in the mega traffic Lok Adalats organized by the DLSA at all
district court complexes in Delhi only in 4 days in September & December, 2007 more than
80,000 traffic challan cases were disposed of.10 The empirical data reveals that if the number of
cases disposed of were the only parameter Lok Adalats would be crowned as the finest ADR
mechanism.

Permanent Lok Adalats are permanent ADR fora which have been established under the Legal
Service Authorities Act, 1987 for resolution of disputes pertaining to public utility services at the
pre litigation stage. The Permanent Lok Adalat initially utilizes the generic process of
conciliation to broker a settlement between the parties and in case the matter is not settled it
proceeds to decide the case on merits, except in cases involving a criminal offence. The
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procedure followed by Permanent Lok Adalats is similar to the ADR hybrid procedures Med-
Arb and Con-Arb.11

In Delhi various Permanent Lok Adalats are functioning for public utility services and are
disposing of numerous cases. Their efficacy can understood from the example that 3063 cases
were disposed of by the Permanent Lok Adalats constituted for NDPL/ BSES cases from
01.04.2007 to 31.03.2008.12 The disposal of thousands of cases by Permanent Lok Adalats in
Delhi is also a significant contribution to the justice delivery system as all these cases could have
become prospective arrears for the Delhi Judiciary.

7.5 STAGE OF USE

Either model can be used at

 Interest understanding stage.

 Pre-mediation stage, should the mediator have called for a pre-mediation summary
from the disputants.

Civil Procedure Mediation Rules formulated by Supreme Court in Salem Advocate Bar
Association v Union of India : (2005) 6 SCC 344. Rule 11: Procedure of Mediation

(iv) Each party shall, ten days before a session, provide to the mediator a brief
memorandum setting forth the issues, which according to it, need to be resolved, and its
position in respect to those issues and all information reasonably required for the
mediator to understand the issue; such memoranda shall also be mutually exchanged
between the parties.
(v) Each party shall furnish to the mediator, copies of the pleadings or documents or such
other information as may be required by him in connection with the issues to be
resolved…
(vi) Each party shall furnish to the mediator such information as may be required by him
in connection with the issues to be resolved.

Arbitration and Conciliation Act 1996-Section 65: Submission of statements to conciliator.

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(1) The conciliator, upon his appointment, may request each party to submit to him a brief
written statement of his position and the facts and grounds in support thereof, supplement by
any documents and other evidence that such party deems appropriate. The party shall send a
copy of such statement, documents and other evidence to the other party.

(2) The Conciliator may request each party to submit to him a further written statement of his
position and the facts and grounds in support thereof, supplemented by any documents and
other evidence that such party deems appropriate. The party shall send a copy of such
statement, documents and other evidence to the other party.

(3) At any stage of the conciliation proceedings, the conciliator may request a party to submit
to him such additional information as he deems appropriate.

CHAPTER-8 UNDERSTANDING CONFLICT

8.1 BASE AND GROUNDING OF CONFLICT

 The source of every conflict is some defect in the understanding, some error
in reasoning or some sudden force of passion.
 While the mediation process aims to transform conflict, it is crucial for the
mediator and each disputant to understand the source of conflict for them to
correct that defect, error or force.

8.2 PROCESS OF DEVELOPMENT OF CONFLICT

 Dissatisfaction: about not being able to achieve a target or a goal.

 Analysis: the party does an analysis for such failure.

8.3 PROCESS OF DEVELOPMENT OF CONFLICT

Analysis in order to:

 Understand the nature of the problem;

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  Decide how he wants it resolved;
 Formulate various means and strategies he could use for getting the desired
resolution.

8.4 PROCESS OF DEVELOPMENT OF CONFLICT

Behavioural Pattern

 The party modifies his behaviour pattern to be in tune with his analysis.
 An erroneous analysis leads to wrongful behaviour and non-resolution of the
problem.
Conflict cycle: The party remains dissatisfied by non-resolution of the problem thereby
starting the cycle of conflict

 Leading to deeper dissatisfaction,

 Even more erroneous analysis, and
 Further wrongful behaviour.

8.5 MODELS TO UNDERSTAND CONFLICT

Commonly used models to understand conflict:

 The Ranking Model

 The List Model

8.6 RANKING MODEL

Mediator requires each disputant to consider and 'rank' in importance the interests that are of
most concern to that disputant. These interests could include

 The target or goal that disputant had wanted to achieve.

 A fair deal or the best deal.
 The need to be vindicated or to 'get even’.
 Personal grievance or need for apology.
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  The need to dispose of this dispute and move on ('get a life').
 The time that the dispute is likely to take if not settled.
 The risks (prospects of success or failure at trial, consequences).
 The money or costs incurred.
 Salvaging a working relationship.
 Other projects that may suffer.
 Repeat the exercise, but this time use his best 'guestimate' to answer as if he were
the other disputant;
 Compare the rankings. Are there any similarities? What are the differences ?
 Discuss the rankings, in confidence, with the Mediator.

Each disputant is to provide his respective rankings to the Mediator who is to keep the
same confidential.

The Mediator to then

 Consider how the disputants have ranked the interests that are important to them;
 Are there any points of agreement between the lists;
 Where are the points of principal disagreement;
 Consider over which points a disputant might be prepared to accept compromise
in return for movement on interests that are more important.

The Mediator may use the rankings of both disputants as a framework for the negotiation
and/or to overcome impasse.

Each disputant is guided through BATNA/ WATNA analysis, and is required to

 Write a list of the issues that are most important to his case.
 Write a list of the strongest points to his case.
 Write a list of his weakest points.
 Write a list of the evidence he has to support each issue. The likely evidence of
witnesses to be included.
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  Identify and write down any issues that are not supported by evidence.
 Write a list of his legal arguments to the best of his understanding and ability. Each
disputant is to then
 Repeat the exercise, but this time use his best 'guestimate' to answer as if he were the
other disputant;
 Compare the lists. Are there any similarities? What are the differences ?
 Discuss the lists, in confidence, with the Mediator.
 The Mediator must not disclose the lists of one disputant with the other.
 The Mediator can use the lists as a framework for the negotiation and/or to overcome
impasse.

CHAPTER- 9 STAGES OF MEDIATION

How Mediation is Different from Litigation and Arbitration

• In litigation, the Judge decides the issue and parties are bound by the decision subject
to the right of appeal/revision etc. In mediation, the parties themselves take the
decision to find a solution to end the dispute.

• In litigation the focus is usually on the past and on determining liability. In mediation
the focus is on the future and improving the situation to the extent possible.

• Litigative proceedings tend to the contentious and procedural and do not yield quick
results. Mediation stresses co-operation and is solution oriented.

• Arbitration proceedings are also adversarial in nature, like litigation. The difference is
that parties can choose their arbitrators and the setting can be less formal. Arbitrators
also give awards in favour of one party and against the other.

• Mediation avoids the win-lose equation and instead tries to achieve a win-win solution,
which puts an end to the dispute.

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Stage at which Mediation can be Tried
Mediation can be tried before trial, during trial or even during pendency of the appeal.

Mediation viz-a-viz Traditional Litigation

There is no conflict between mediation and court trial. Some cases need to be litigated
whereas other needs to be mediated. Thus, mediation is complimentary to the court
proceedings and is not opposite to the Court proceedings. That is why Section 89 gives
mediation as one of the methods for the resolution of a dispute in cases instituted in the
Court.

Choice of Mediator
As per Mediation and Conciliation Rules framed by the Delhi High Court, retired Judges of
the Supreme Court of India, retired Judges of Delhi Court, retired Judges of Delhi Higher
Judicial Service, Serving officers of Delhi Higher Judicial Service, a Legal Practitioner with
at least 10 years service at the bar, experts or professional with at least 15 years of standing
are eligible to be empaneled as Mediators in a court annexed mediation. Otherwise, the
parties can decide and choose any person to mediate any dispute between them which has not
gone to the court.

Brainstorming: “Brainstorming” in mediation process involves the following:

- Inventing / Generating Options for an agreement.

- Evaluating Options for an agreement.

- Identifying the issues for resolution

- Focusing party on their long term interest.
- Getting parties to be realistic about their case especially its weakness
- Making them examine their alternatives to settlements.
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- Giving them freedom to create options for settlement.
- Refining their suggestions and reaching agreement.

Lateral Thinking: “Lateral thinking” is a type of thinking that is creative, innovative, and
intuitive. Lateral thinking is non-linear and non-traditional. Mediators use lateral thinking during
the brainstorming process to develop terms of agreement that further the interests of the parties.
Lateral thinking is often contrasted with logical thinking, which also plays an important role in
mediation. Logical thinking is linear, traditional, rational, and fact-based. Mediators use logical
thinking to analyze facts, to assess liability, and to understand the positions of the parties.

Impasse or Dead Lock: This occurs due to following reasons:

 Ultimate acknowledgment of failure

 Failure of participants to reach an

Agreement. Steps which can be taken by
Mediator
 Alert the participants
 Inform parties/Lawyers in caucus meetings
 Solicit any 'last ditch' efforts.
 Talk with lawyers apart from their clients
 Brainstorm on final settlement offers

 Before declaring an impasse, bring parties and lawyers in general session and seek final
offers.

Origins of Impasse
 Emotional
- Personal animosity / mistrust Vengeance
- Pride/ego/fear of loosing face.
- Fear of change.
 Substantive
- Lack of knowledge of facts and law.

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 - Limited resources.
- Lack of Bargaining Power.
- Incompetence.
- Third parties.
- Fear of being taken advantage of o Standing on principles
- Procedura
- Lack of authority.
- Power imbalance
- Mistrust of Mediator

Ten Effective Ways to Settle a Dispute

(1) Split the difference
(2) Conditional offers (“what if” offers)
(3) Use reactive devaluation.
(4) Convert to arbitration
(5) Integrative bargaining
(6) Shift focus to finality, control, risk management, and other intangibles.
(7) Reality testing.
(8) Compare alternatives (BATNA, WATNA, MLATNA)
(9) Generate momentum toward settlement with multiple claimants by settling easy claims first.
(10) Re-visit issues.

Effective Mediator
1) Listens and respondents courteously and with understanding.
2) Acknowledge points made and the significance to the parties of problems and issues.
3) Encourages Parties to make their own decisions.
4) Subtly analysis Parties' presentations.
5) Asks relevant and insightful questions.
6) Probes, for clarification.
7) Keeps track of new information and changing positions.
8) Appears relaxed, alert and engaged with the process.
9) Demonstrates skill and confidence throughout in verbal communication.
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10) Presents information, analysis and explanations in ways that influence the Parties positively.

Ineffective Mediator
1) Allow Interruption
2) Give attention to the person who interrupts
3) Fail to handle interruption appropriately.
4) Allow parties to cross talk.
5) Fail to hold caucus at appropriate time.
6) Cut off parties attorney / friends.
7) Rushing process.
8) Fail to follow four stages of mediation.
9) Reconvene joint session at wrong time.
10) Mediator fixing problem for the party.

Qualities of a Good Mediator

1) Trust: This is the most important characteristic. If the parties do not respect the
Mediator, the chances of success are small. Mediation often involves private discussions
between a party and the Mediator. If the party does not trust the Mediator to keep
confidences disclosed at such a session, there will exist little chance of success.
Similarly, if the parties cannot trust the Mediator to evaluate their positions impartially,
the mediation is doomed.

2) Patience: Parties frequently come to the mediation with set positions that take a long
time to modify. A Mediator must have the patience to work with the parties to bring them
to the point where agreement is possible.

3) Knowledge: The chances of success are greater if the Mediator has some knowledge or
expertise in the area of dispute. Because mediation does not result in a decision by the
neutral, knowledge of the subject matter is not as crucial in mediation as it is in
arbitration. However, the parties in a complicated dispute over software, for example,
will have more confidence in a Mediator who knows something about software
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 technology than they would in a Mediator who knew nothing about the subject.
Furthermore, such expertise will enable the Mediator to better assist the parties in
identifying nontraditional solutions to their dispute.

4) Intelligence: A Mediator must be resourceful and attentive to understand not only the
nature of the dispute, but also the motivations of the parties. Through an understanding of
what is important to each of the parties, the Mediator can bring them into agreement
much more quickly. The requirements are thus not only an ability to understand the
subject matter, but an ability to understand people and their motivations as well.

5) Impartiality: This characteristic is closely related to trust. A Mediator must be impartial.

Some Mediators will express their opinions about the position of a party, or will use their
powers of persuasion in order to bring the parties to agreement. Other Mediators will not
analyze or evaluate the merits of a dispute, but will cause the parties to realize on their
own where the settlement potential lies. In either case, the parties must be satisfied that
the Mediator is neutral. In the former situation, if the Mediator is not viewed as neutral,
any opinions will carry no weight; in the latter situation, the parties will refuse to follow a
biased leader.

6) Good Communication skills: An arbitrator needs only to listen to the evidence and
render a decision based upon knowledge of the law and good judgment. Although these
talents are extremely valuables ones, an arbitrator need not have the ability to
communicate with the parties. A Mediator needs good judgment and good
communication skills; it is the Mediator's job to evaluate and understand the motivations
of the parties, foresee potential solutions, and then bring the parties to an agreement.
Without good communication skills, this task is impossible.

Barriers to Resolution of Dispute

1) Strategic Barriers:

Negotiation is compared to making a pie and dividing the pie. Conflict resolution affects
the size of the pie. And who gets what size? Litigation can shrink the pie – that is costs,
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time, relationship, priorities, needs etc. Negotiation can create values and enlarge the pie.
On the other side, distributive aspects can create deadlocks. For example, A has 10 apples
and B has 10 oranges. [Assume that no other apples and oranges are available in the
market]. A hates apples but loves oranges. B loves both equally. If A tells B about it and
asks oranges for exchange, B will do strategic bargaining and would say he also likes
oranges, though it is not true. B will offer one orange for say 5 apples. But if A tells his
interest in oranges to a Mediator in a private caucus and asks him not to disclose it to B,
favourable solution can be reached faster and beneficial to both. Thus a mediator helps in
overcoming strategic barriers by inducing the parties to reveal information about their
underlying interests, needs, priorities and expectations.

2) Principal and Agent Barriers:

Incentives for an agent negotiating for the principal may induce behaviour that fail to
serve the interests of the principal. A Mediator involves the parties directly and tackles
this barrier. A mediator helps in overcoming Principal-Agent barriers by bringing real
decision maker [Principal] to the table and help him understanding his own interests.

3) Cognitive or Perceptive Barriers:

Each party has its own perception or feelings over an issue. Parties fight [gamble a
litigation] to avoid loss. They settle to receive a gain. For example, there are two gates in
this hall, and the organizers declare that those who exit from North Gate will get Rs.
1,000/- each and out of these who exit from South Gate randomly selected few, say two,
will get Rs. 5,000/- each. Which gate will most of the people select? Usually people do
not gamble for a gain. This is called Risk Aversion.

Now let us change the game. Organizers announce that those who go out of the North
Exit will each pay Rs. 1,000/- and out of those who exit out of the southern Gate,
randomly selected few, say two, will pay Rs. 5,000/- each. Which gate most people will
select for exiting?
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- Usually people gamble to avoid loss.

- Sure loss [No]

- Possibility to avoid loss [Yes]

Mediator takes parties from loss aversion to risk aversion. Thus a mediator helps in
overcoming cognitive barriers by emphasizing potential gains and de-emphasizing or
dampening the losses.

4) Psychological Barriers (Reactionary Devaluation):

“If only we could settle for Rs. 10 lakhs, I would put an end to it”. Next day the other side
offers Rs. 10 lakh. “No, no! They must know something we do not know”. Or “If it is a good
settlement for them, it cannot be good settlement for us.” Concessions offered are rated lower
than concessions that are withheld. A mediator helps in overcoming psychological barriers or
reactive devaluation by owning the source of the proposal. [Changing the messenger.

Place of Lawyer in Mediation

It has been found that wherever the lawyers are assisting their parties during the course of
mediation, the settlements have been easy to come. (Barring a few case where the lawyers
have stalled the settlement which was just going to be arrived.). Always give recognition to
the presence of the lawyer and tell them their importance of being present with the parties
and that it would be easier for the parties to settle the dispute if they are assisted by their
lawyers. Give credits to the lawyers for reaching the settlement. The lawyers want their
clients to feel that without them they would have paid more or get less.

Are there Benefits in Mediation for Lawyers?

a) Mediation helps lawyers as for lawyers
b) It is another avenue of professional practice and income.
c) Appearing for a client is a professional service for which lawyers charge their fees. When
cases come up faster for resolution instead of decades later, the income is earned now.

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d) Studies have shown that clients are far more willing to pay fees for mediations in which
they participate and can understand than for litigation in which they feel excluded and do
not see progress. Mediation invariably means a satisfied clients who participate and sees
results, and satisfied clients come back to their lawyers with more business.
e) There is satisfaction in helping to bring about beneficial solutions.

Lawyers as Mediators

Lawyers make good mediators and are sought after. Becoming a mediator is a new field
which lawyers, especially senior ones, may like to try. It has elements of the resolver and
peacemaker, and can also be professionally rewarding. So whether the lawyer refers clients'
cases to mediation, or appears in mediations for clients, or becomes a mediator part or whole
time, several opportunities have opened up for members of the legal profession. Abroad, it is
now common to find leading lawyers and retired Judges of distinction focusing on mediation.

What is the Role of Lawyers in Mediation?

In Mediation the lawyer's role of arguing, demolishing or cutting down the other side's
arguments does not help very much since there is no presiding officer to give a verdict forone
or the other. Instead the lawyer's role is use his legal skills and practical knowledge to see if a
solution is possible, and if so, to help evolve one. A primary role is to protect the client's
legal interests. The lawyer must also ensure that the client is made aware of the implications
of the decision he is taking. If the mediation is proceeding in a manner which is disturbing or
not serving the interests of the party, the lawyer may advise terminating it.

Benefits of Mediation

A. It is Fast: As the amount of time necessary for the parties and the Mediator to prepare for
the mediation is significantly less than that needed for trial or arbitration, a mediation can
occur relatively early in the dispute. Moreover, once mediation begins, the Mediator can
concentrate on those issues he or she perceives as important to bring the parties to
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 agreement; time consuming evidence-taking can be avoided, thereby making the best use
of the parties' time and resources. Even if the entire evidence gathering has already
occurred, it almost invariably takes less time to mediate a dispute than to try it in a court.

B. It is Flexible: There exists no set formula for mediation. Different Mediators employ
different styles. Procedures can be modified to meet the needs of a particular case.
Mediation can occur late in the process - even during trial- or before any formal legal
proceedings begin. The mediation process can be limited to certain issues, or expanded as
the Mediator or the parties begin to recognize during the course of the mediation
problems they had not anticipated.

C. It is Cost Efficient: Because mediation generally requires less preparation, is less formal
than trial or arbitration, and can occur at an early stage of the dispute, it is always less
expensive than other forms of dispute resolution. If the mediation does not appear to be
headed in a successful direction, it can be terminated to avoid unnecessary costs; the
parties maintain control over the proceedings.

D. Brings Parties Together: Parties can save and sometimes rebuild their relationship like in
a family dispute or commercial dispute.

E. It is Convenient: The parties can control the time, location, and duration of the
proceedings to a significant extent. Scheduling is not subject to the convenience of
courts.

F. It is Creative: Resolutions that are not possible through arbitration or judicial

determination may be achieved. For example, two parties locked in a dispute that will be
resolved by an arbitrator or a judge may be limited to recovery of money or narrow
injunctive relief. A good Mediator makes the parties recognize solutions that would not
be apparent – and not available

- during the traditional dispute resolution process. Two companies may find it more
advantageous to work out a continuing business relationship rather than force one firm

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 simply to pay another money damages. The limit on creative solutions is set only by the
variety of disputes a Mediator may encounter.

G. It is Confidential: What is said during a mediation can be kept confidential. Parties

wishing to avoid the glare of publicity can use mediation to keep their disputes low-key
and private. Statements can be made to the Mediator that cannot be used for any purpose
other than to assist the Mediator in working out a resolution to the dispute.
Confidentiality encourages candour, and candour is more likely to result in resolution.

H. Control: The parties control the outcome of the mediation and either party has the
advantage of terminating the mediation, if it is felt that it is not in the interest of the said
party.

I. Direct Communication: In a mediation, there is party to party direct communication. At

least the parties have the feeling of being heard by the Mediators if the parties or either of
them is being represented by an advocate.
9.1 MEDIATION PROCESS AND ROLE OF THE MEDIATOR

Mediation is a process in which the parties to a dispute, with the assistance of a neutral third
party (the mediator), identify the disputed issues, consider alternatives and endeavour to reach an
agreement. The mediator has no advisory or determinative role in regard to the content of the
dispute or the outcome of its resolution, but may advise on or determine the process of mediation
whereby resolution is attempted.

Mediation can either be private or mandated by court. In both types, the initial stage or pre-
mediation phase, may involve mediator informing parties about the mediation process. This may
also involve mediator dealing with queries of disputants, making them understand about the
particular models and approaches, checking the suitability of mediation, and helping parties
reach the stage of readiness to commit themselves to signing up to the process.

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 Various stages of Mediaton78

Mediator’s Opening Statement: Stage One

Mediator enters a dispute by court referral or by direct choice of the participants. The
commencement of the mediation is typically marked by an „opening statement‟ of the
mediator. This introductory stage is vital to the establishment of a relationship that will
facilitate the rest of the mediation process. The mediator must provide initial structuring, gain
the participant‟s trust and cooperation in the process by highlighting the advantages of
mediation. Even if the parties have participated in mediations before, it is not advisable to
skip the opening statement. There are several reasons for beginning the mediation in this
fashion:

 to educate the parties about mediation,

 to establish the procedures and the mediator‟s role,
 to put people at ease,
 to convey a sense of mediator competence and skill, thereby inviting trust and
comfort with the process and the mediator,

78
(Diagram is adapted from) Rau, Sherman & Peppet, Process of Dispute Resolution: The Role of Lawyers
(Foundation Press, 3rd edn., 2002) p.340 (stating that typical mediation has six stages.)
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  to reconcile any conflicting expectations regarding what will happen in mediation,
 to satisfy ethical requirements (if applicable).
 Typically, there are six basic components to an opening statement:
 introductions of the mediator, disputants and others present,
 establishing credibility and impartiality,
 explaining the process of mediation (that it is voluntary, confidential, self-
determinative, informal, flexible and time bound) and the role of the mediator,
 explaining the procedures which will govern the process (including, if applicable
the possibility of meeting separately with the parties),
 explaining the style or approach of mediation79,
 explaining the extent to which the process is confidential or inviting parties to set
terms of confidentiality,
 asking the parties if they have any questions.

During the mediator‟s introduction, all participants are introduced. The mediator then
describes his/her role, explains the mediation process, and sets out any ground rules 80 that
guide the process. The mediator may also identify and briefly discuss benefits of the process.
Legal parameters, such as confidentiality and enforceability of settlement, are outlined. Goals
and objectives from the mediator‟s standpoint are also set out.If the mediator plans to take
written notes, the mediator should let the disputants and advocates know. It is generally a
good idea to provide pen and paper for the disputants and encourage them to listen for new
information and to take notes, if necessary, while the other is talking. This enables the parties
to remember issues they want to discuss without having to interrupt each other.81

In order to gain the disputants‟ trust and confidence, a mediator should assure the disputants
of the mediator‟s impartiality about the dispute and the individuals involved. The most
79
Whether the mediation style adopted by the mediator will be only facilitative, or evaluative or will be mixed of
both-this must be made clear at the outset. Mediator should inform parties about his possible role as merely
facilitator or evaluator at some stage of the mediation
80
Mediators commonly help parties frame certain ground rules which the parties throughout the process must
adhere to. See, Melamed, J., “Sample Mediation Ground Rules” (Aug. 1998) available at
http://www.mediate.com/articles/melamed7.cfm
81
See, Bullen, Barbara A., Mediation: A Training and Resource Guide for the Mediator (Trafford Publishing,
2012) pp. 310-311

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concise, credible way to do this is to provide the participants with information regarding the
mediator‟s previous experience and knowledge about the dispute, any previous acquaintance
with either of the party or their lawyer; and then let the parties draw their own conclusion.

The mediator‟s opening statement should be clear and concise. A mediator should try to
avoid using „jargon‟ or technical words that the disputants are unlikely to understand (e.g.,
plaintiff, defendant, claimant, respondent, per se, or other difficult legal terms). Even if the
parties are represented by advocates the advocates are present, it is a good idea for the
mediator to focus the opening statement on the parties, to talk directly to them, and to ensure
their understanding of the process. Although delivering an opening statement should not
consume a lot of time, a mediator should not rush through it. The mediator's opening
statement is important- it must be long enough to cover all of the elements clearly and
completely, and short enough not to lose the interest of the parties.

In developing an opening statement, a mediator should recognize that an opening statement

need not be structured in any particular order, but it should flow and sound like the individual
mediator. It may also vary depending on the type of mediation and the context of the
mediation.

Disputants’ Opening Statements: Stage Two

Following the opening statement by the mediator, it is then the turn of the parties to begin.
Each party is provided with an equal time to talk and the choice of who speaks first is left to
the parties, although normally the person who initiates the dispute will speak first.82

The stage is also called „ventilation‟ as the parties, locked in bitter dispute, is likely to
furiously air his/her grievances. The mediator should calm things down and request parties

82
See, Spencer, David & Brogan, Michael, Mediation Law and Practice (Cambridge University Press,
2006) p.58

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not to lose their composure while making the opening statement. The parties and/or their
representatives should be able to ventilate their views of the case or dispute. The opening

statement stage provides a time for parties to fully express and explain to the mediator, and
more importantly, to each other, how they view the dispute in their own words.

The mediator must listen carefully the statements of the parties, the manner in which the
information is shared, and the order of presentation are all important pieces of information.
The mediator should usually let each disputant take as much time as needed without
interruption from the other party or the mediator.

When the first party is finished, the mediator should not ask the other to „respond‟, but rather
should invite a description or explanation of that party‟s issues and concerns. The second
person to speak often feels defensive- the mediator‟s job is to put the parties at ease enough
to share what is important to them.9

After each party has spoken, the parties often will look to the mediator to identify the next
step in the process. The mediator could then identify and summarize the issues as the parties
have put them forth. To perform that important task requires a mediator to organize the
information accurately and constructively. For this purpose, mediator may take „notes‟ after
letting parties know about the purpose of such note-taking. Parties should re-assured that
such notes will remain and cannot be used as evidence in formal proceeding. 10 A mediator‟s
notes serve three important purposes:

i. identification of the issues which the disputants wish to address

ii. clarification of statements/issues for the mediator

iii. record of “movement” with regard to offers and solutions

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 After the conclusion of the opening statements by the parties, the mediator has to
summarize the parties‟ opening statements. The mediator will summarize what each
party has said. This will be what it implies- a summary- not a verbatim report even
though the note-taking may have been quite detailed. The purpose of the summaries are:

i. to assure the parties that the mediator has heard, noted and summarized their
individual issues and concerns,

ii. to give each party the opportunity to hear through the mediator the other side‟s
version a second time.

Joint Session: Stage Three

After all participants and/or their representatives have presented their views through their
opening statement, at this point, the mediator may try to lead the disputants to joint
discussion and get them talking directly with each other in his presence. This phase may
come before or after the separate meeting between a party and mediator. Generally, the
mediator has a tough time during this phase as parties are likely to engage in bitter accusation
and counter-accusations. He has to ensure that parties engage in constructive talks. To this
purpose, he has to try to get the parties away from their stated positions to the ones which are
workable and future-oriented.

The primary objective of the joint session are as follows11:

i. to gather information,
ii. to provide opportunity to the parties to hear the perspectives of the other parties,
iii. to understand facts and issues,
iv. to understand perspectives, relationship and feelings,
v. to understand obstacles and possibilities, and
vi. to ensure that each participant feels heard.

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Identifying Issues and Interests

Arguably the most critical point in the third stage of mediation is the identification of issues
and interests. While the parties may well be clear about the „position‟, or stance, that the
other side has taken in relation to the dispute, it is not always the case that the reasons for
that position are apparent. Hence it is vital that mediator assists the parties to uncover the
issues and interests, or the reasons, for the position held.

While mediator tries to discern the underlying issues or interests of the parties, he should
educate the parties about usefulness of interest-based negotiation.12 One of the major reasons
why parties reach impasse in negotiation and mediation is their inability to identify their own
interests and the interests of the parties. Parties‟ failure to identify interests often arises from
their lack of awareness of them, intentional hiding of them, unconscious equating of them
with their positions, and lack of awareness of procedures to explore theirinterests. 13 In such
situation, mediator can often be of great benefit to the parties in helping them identify their
relevant interests. However, the identification of the issues and interests is, practically, not as
easy as it might seem. Parties may be nervous about disclosing matters that might later be
used against them in a court hearing, personal or business relationship, or later in the
mediation.14

Agenda Development

Agenda development includes listing issues, interests and concerns of the parties. The
issues15 in dispute are recognised and the dispute is broken into parts so that the issues are
dealt with and agreement can be reached. This process is done by determining the underlying
interests and ensuring that they are framed in neutral language. For example, framing the
issue as „breach of contract‟ (which may be an issue for one party but not both), may lead to
blame-game and limit the discussion between the parties. However, framing the same as
„obligations under agreement‟ can present a more neutral agenda item.

Most mediators and facilitators use whiteboards to note down agenda items or issues. In
adjudicative or determinative methods this is seldom done. Writing down the issues on a
whiteboard has a number of advantages that include:

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 i. objectifying the issues in a transparent manner before the parties,
ii. ensuring that no issues are missed,
iii. showing that all parties have been heard,
iv. addressing issues rather than positions ensures that broadest possible options can be
developed.

Identifying Common Ground

Even where parties are unwilling to agree on contentious issues, there are some common
issues or grounds, which need to be identified and addressed by the mediator. One of the
common grounds in most mediations is that parties generally agree that they would like to
see the dispute end. Further, parties may wish to end the dispute within a time period or as
soon as possible. Mediator has to identify this common ground and motivate the parties to
resolve the dispute.16

Another common ground could be parties‟ willingness to keep the matter out of court. This
may be for variety of reasons like, litigation costs, excessive delays, and uncertain result in
court. A mediator has to identify this and push the parties towards negotiated deal in
mediation.

Similarly, the parties may wish to keep the relationship that they had prior to the dispute in
place rather than let it collapse because of the dispute. Therefore, another issue on which
there could be some common ground is whether the parties wish to continue their relationship
after resolution of the dispute.17

There are many ways to construct the agenda of discussion. It is the mediator‟s key
responsibility to set an agenda based on what the parties have said if they do not do so for
themselves. One of the greatest assets a mediator brings to the mediation is an ability to
create structure and develop a process to assist the parties‟ communication. If the parties

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themselves or the mediator neglects to create an agenda, the possibility increases that the
discussion will degenerate into impasse not because the parties necessarily disagree on all
matters, but rather, because no one focused on separating those items on which the parties
agree from those about which they remain in substantial disagreement.

Identifying Options for Early Agreement

In identifying common ground, it may be clear that there are options for resolution being
generated to which all parties agree. Option generation comes hand-in-hand with the exploration
of identified issues as it is part of the way people solve problems. Mediator should encourage
parties to generate options. Mediator may do „brainstorming‟ 18 and „reality testing‟19 of the
options with a view to those options satisfying the identified interests of the parties. Options, if
generated, should be examined closely, particularly if they might lead to agreements in principle.

Mediator’s TacticS

Where the parties are stuck over issues, the mediator has to employ a range of tactics to
break the deadlock, and to keep the mediation moving. Moving the parties away from their
entrenched positions to interests, requires a lot of effort on the part of a mediator. Alfini 20 has
enlisted a range of mediator‟s tactics to deal with any impasse in the mediation. These are set
out below:

 Focus on the future- It is helpful to remind parties that they cannot change what
happened in the past, but they can decide how they want things to be in the future. As a
means of comparison, the traditional litigation process focuses on the past, determining
what happened, and who was wrong or right. In mediations involving an ongoing
relationship, what happened in the past need only be relevant in helping parties determine
how they want to behave in the future.

 Use of humor- People become more flexible when they are laughing because laughter
often reveals some comfort with oneself and the situation. However, humor should never
be used at the expense of anyone involved in the mediation.

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 Integrative solutions- If the mediator helps the parties and their advocates to identify
their interests (not just their positions) and think creatively, they may be able to identify
issues in which they both can achieve the „win-win‟ solution that they want.

 Establish priorities and trade-offs- Not everything that the parties or their advocates
present at mediation will be of equal importance to them. Helping them identify which
items are most important will help them see that other items are less important. This may
yield greater flexibility and ideas regarding items to „trade-off.‟

 Use of role reversal- Helping parties and advocates see the situation from the other
person‟s perspective is often very helpful. This technique is most useful when meeting
separately with the parties and they are able to react with greater honesty.

 Point out possible inconsistencies- A mediator should not evaluate the merit of
parties‟ positions, but he should point out the inconsistencies within comments or
proposals that have been made by the mediator.

 Identify constraints on others- Everyone operates under some constraints- be they

economical, psychological or political. Proposed solutions must account for these
constraints or the solution will not be acceptable. Assisting the disputants to see each
other‟s constraints may be useful in helping them understand the dynamics at work in
reaching an agreement and lead to greater creativity.

 Be the agent of reality- The mediator should never force the parties to settle their
dispute or any portion of it in mediation. The mediator may, however, help the parties to
think through the consequences of not resolving the dispute in mediation. The parties
may want to consider monetary costs, time lost, relationship issues, and the uncertainty of
a court outcome when evaluating the acceptability of the proposed settlement terms so
that their decision to settle or not is as informed as possible.

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  Appeal to past practices- Sometimes the parties will have had a prior good
relationship. In such cases, it may be useful for the mediator to explore with the parties
how they have resolved similar issues in the past. If the parties have no prior relationship
(or no positive prior relationship), this will probably not be a useful technique.

 Appeal to commonly held standards and principles- Sometimes both parties will
express a common theme, for example, to be treated respectfully or that they are
concerned about the„best interest of their child‟ (in family mediation). While
acknowledgment of this notion will not solve their issues, it is often helpful for the
mediator to point out to that they do agree on some matters.21

These techniques can help trigger flexibility. The mediator may select a place for the parties
to begin their discussions, but quickly discover that resolving it is more complex or difficult
than originally envisioned. The mediator can deploy several different approaches for
generating options for agreement as described above.

Caucus or Separate Session: Stage Four

The need for caucus22 or separate meeting between the mediator and a party (accompanied
with or without advocate) may arise in certain situation. It involves private discussions about
issues, interests, and options for resolution. The call for caucus has to come from the
mediator in a scenario when parties have reached an impasse. Speaking privately to the
parties will allow the mediator to discuss issues that the parties may be uncomfortable talking
about in front of each other. The separate session can alleviate such concerns and, at the
same time, give the mediator an understanding of what is really driving the dispute.23

While a mediator must never disclose information discussed in caucus with the party, unless
the disclosing party had authorised the mediator to do so, the mediator can use such
information to assist both parties in settling on options that will satisfy interests. Separate
sessions also allow the mediator to test information. Detailed questioning can take place
which, if conducted in joint session, may embarrass one party.

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Another, important use for separate sessions is the discovery of the best alternative to a
negotiated settlement (BATNA) and/or the worse alternative to a negotiated settlement
(WATNA). BATNAs are a vital piece of information for the mediator as they disclose when
a settlement is better or worse than the parties‟ best alternative to a negotiated settlement. If
the options being proposed as a settlement are worse than a party‟s BATNA, then the
chances are that the party will not settle i.e. he or she would be better off walking away from
mediation and living with his or her BATNA. The converse is also true, in that if the options
being proposed as a settlement are better than a party‟s BATNA, then the chances are the
party will agree to accept the settlement.24

Another valuable use of the separate session is when there are the heightened emotions at
play in in the dispute. In such cases, it is better to separate the parties sooner rather than later.
This will diffuse any tensions that threaten to destabilise the mediation. In some mediations,
where parties are displaying high levels of animosity towards each other, it may be
appropriate to have a very short first joint session, and then virtually break off into separate
sessions as soon as the mediator has explained the process of mediation. This, of course,
should only be done in extreme circumstances. The converse is also true. Where parties are
happy to discuss the dispute in its entirety in joint session, then the mediator should not stop
that process by breaking off into separate session. It should be borne in mind that mediation
is really a process owned by the parties and they should be allowed to dictate the procedure
for reaching an agreement.

Once the mediator has had one or more separate sessions with one party to settle the issues
and interests and to generate the first set of options, he or she may conduct the next separate
session with the other party and follow the same process of option generation with that party.
This repeat exercise depends on the situation, and may see mediator going back and forth,
shuffling between the parties,25 seeking agreement on the various options being suggested by
the parties.

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As the mediator moves from option to fashioning a settlement on behalf of the parties, he or
she should do reality testing of the options. Reality testing means testing the option for its
potential. In other words, will the option practically work if parties agree on it? Further, how
will the option work if the parties agree on it?

These questions on how the settlement is to be practically implemented are important ones
which the mediator has to raise with the parties, as they are the sort of issues that, if left
unaddressed, can cause a settlement not to be honoured by one or more of the parties.

Final Negotiation & Deal-Making: Stage Five

Final negotiation stage involves activities initiated by both the parties and the mediator to
reduce the scope of substantive and procedural differences between parties, so to move
toward a formal agreement leading to the termination of conflict. This is the final joint
meeting between the parties in the presence of mediator before the closure of mediation. In
this round, the results of the separate meeting are carefully considered. If there remains any
miscommunication or misunderstanding, then those are discussed and removed, before
parties reach the resolution of the disputes. If deadlock worsens, then they may, however,
take a realistic decision to discontinue mediation and settle their dispute in other forum like
court.

Possible Negotiated Outcomes to a Conflict

Christopher Moore suggests that even where mediation is failing, the parties to mediation,
after having invested their valuable time and energy, are likely to come to partial settlement,
than to see „no-settlement‟ at all. 26 He has provided a spectrum of possible negotiated
outcomes to a conflict27:

i. The 100 percent solution- Parties have all substantive, procedural and
psychological interests satisfied.

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 ii. Compromise- Parties share gains and losses in order to reach agreement.
Compromise can occur on specific issues or in the negotiations as a whole.

iii. Temporary settlement- Parties are unable to reach a permanent agreement, but
agree on a temporary settlement, that will be tested and evaluated at a later date.

iv. Procedural solutions to substantive problems- Parties devise a process by which

they can obtain an answer to a substantive issue in dispute.

v. Deferred decisions- Parties decide, either unilaterally or jointly, to delay decision

till a more favourable time is available.

vi. Partial settlement- Parties agree on some issue but continue to disagree on others.

vii. Mutual dropping of issues- Parties implicitly or explicitly agree to drop an issue
in dispute.

viii. Non-binding decision- Parties agree on some sort of agreement but compliance
part is not guaranteed.

ix. Issue avoidance- One or more parties decide to avoid a complicated and irritating
issue.

x. Decision referred to a third party decision maker- Parties cannot decide but they
defer the decision to a third party for a binding or non-binding decision.

xi. Impasse or stalemate- Parties cannot decide and negotiations break down. Neither
party has the power to force the issue in his or her favour or to develop a mutually
acceptable solution.

xii. Continued negotiations- Parties cannot agree, so they do agree to continue

negotiating.

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 xiii. Shift to another approach of conflict resolution- The parties are unable to reach an
acceptable settlement, and move to another method of dispute resolution.

The final negotiation stage is very crucial and it requires a well-trained mediator to sail
through the remaining impasse and bring parties to a negotiated deal. A novice mediator
might fail in such situation. What is required on the part of the mediator is to remain
determined in his pursuit of bringing a successful closure of the mediation. Even where
negotiations have not yielded any result, the skilled mediator will shed light on the positive
outcome, if any, generated out of the joint endeavours.

Closure: Stage Six

It is important that a process initiated, must end finally. Closure is the last process in
mediation. Mediation may terminate in a number of circumstances. It terminates when the
parties have resolved all their issues, or when they have resolved some issues and decided to
take the others into a different forum such as arbitration or litigation. It may come to an end
when one party simply walks out of it saying that he/she does not want to continue with
mediation; or when the mediator decides that it is inappropriate to continue with mediation as
there is no reasonable prospect of resolution, or otherwise, unethical to continue with
mediation. Hence, closure envisages both, successful and unsuccessful outcome(s).

In case of successful outcome, settlement terms are reduced to writing leading to a formal
agreement between the parties. In order that this mediated agreement becomes legally
enforceable, it must be duly signed by the parties and mediator. 28 The settlement may also
contain an implementing or monitoring mechanisms for the current as well as future
differences or conflicts that may arise.

If the mediation was court mandated, the mediator will probably be required to file a report
of „impasse‟ with the court.29 Most courts will accept a report from the mediator which states
when the mediation occurred, who appeared at the mediation, and that no agreement was
reached. While some judges may want to know why no agreement was reached, rules of
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confidentiality will often prevent mediators from providing this information. However, if the
case was mediated voluntarily or pursuant to an agreement of the parties, there is normally
no need for the mediator to write a report. If there is alleged non-compliance with what was
settled in mediation, then one party must take the additional step of filing a court case to
enforce the mediation agreement as a contract.

Where the mediation ends without settlement terms being agreed, there are no specific
formalities. Some mediators conscientiously persevere in assisting the parties to reach
agreement despite the imminence of ending the process. Mediators encourage the parties and
advocates to consider returning to mediation (with the same or different mediator) if they
think it would be helpful. The process finally ends on a positive note with the mediator‟s
concluding address in which he thanks the party for their time and effort at the mediation.30

Concluding Remarks

Mediation is a structured process, though it may vary and adapt itself suitably depending
upon the nature and context of the dispute. The stages in mediation constitute a flexible,
creative and non-legal process, unfettered by rigid procedures and rules. The role of mediator
is extremely crucial during all the stages of mediation. A trained mediator through his
variegated skills and expertise can facilitate parties to the negotiating table, leading perhaps
to the constructive resolution of the dispute. The process is lauded for its essential attributes,
such as flexibility, informality, creativity, confidentiality, parties‟ self-determinative role
etc., which are absent in adjudicative processes. Parties‟ to mediation have full opportunity
to participate in the decision making process. In that sense, mediation affords procedural
fairness to the parties. However, the concerns remain high that in absence of the skilled
mediator, the process might generate legal, as well as ethical challenges.

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CHAPTER- 10 ALTERNATIVES TO NEGOTIATED AGREEMENT

BATNA: Best Alternative To Negotiated Agreement

WATNA: Worst Alternative To Negotiated Agreement

MLATNA: Most Likely Alternative To Negotiating Agreement also termed as EATNA

(Estimated Alternative To Negotiated Agreement)

In assessing the value of a settlement offer, it is important to compare the pending offer to
any alternatives to settlement that may exist. In the context of litigation, for example,
negotiations often compare settlement offers to the predicted outcome at trial, factoring in the
additional expenses of going of trial, the risk of losing, and the delay in reaching a judgment

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or verdict. In this manner, the negotiator can use the projected trial outcome as a point of
reference in determining whether a pending offer is favorable.

One method of comparison used by negotiators is to compare a pending settlement offer to

the best outcome at trial, also known as the BATNA (best alternative to a negotiated
agreement). Using this point of reference, the negotiator will determine whether the
settlement offer is close to, equals, or exceeds the best outcome at trial, after adjusting for the
litigation expenses of trial, the risk of losing, and the delay in resolving a dispute.

Another valuable method of comparison is for the negotiator to compare the pending
settlement offer to the worst projected outcome at trial, which is the WATNA (worst
alternative to a negotiated agreement). This point of reference is valuable to a negotiator in
determining whether a settlement offer exceeds a party's worst possible outcome at trial.

Using the BATNA and the WATNA will help a negotiator determine whether a settlement
offer falls within the range of projected trial outcomes by establishing the high and low
alternatives to settlement.

Perhaps one of the most important points of reference for a negotiator is the MLATNA (most
likely alternative to a negotiated agreement), which reflects the most probable outcome at trial.
Litigators are familiar with the possibility of a judge or jury rendering an award that falls within
a reasonably predictable range (the BATNA and WATNA). Litigators are also familiar with the
fact that it is often possible to narrow the range of possible trial outcomes further by using their
experience as trial advocates and their knowledge of the community norms for valuing a
particular type of case. Thus, as part of the negotiation process, a negotiator generally will
predict the high, low, and most probable trial outcomes in order to develop a strong point of
reference when deciding the relative value of a settlement offer.

Mediators can use the BATNA, WATNA, and MLATNA as part of the reality testing process
in private caucus, to assist the parties and their advocates in evaluating the strength of a
pending settlement offer in relation to the possible outcomes at trial. Systematically exploring
the BATNA, WATNA and MLATNA with parties and advocates will also provide the
mediator with valuable insight into the factual, legal, and analytical basis for their positions.
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Another use of the BATNA, WATNA, and MALTNA by mediators is to employ this type of
analysis for the purpose of overcoming negotiating impasses. It is often useful for a mediator
to remind parties of their BATNA, WATNA, and MLATNA when they lose sight of their
strategic objectives, when they are react strongly to an interim offer by another party, or
when they believe they would like to terminate the negotiating process.

By focusing on the BATNA, WATNA, and MALTNA, a mediator can assist parties in
making a balanced and systematic evaluation of their alternatives to settlement. This type of
analysis will often bring clarity establishing alternatives and enabling the parties to develop a
concrete measuring stick by which they can evaluate settlement offers.

CHAPTER-11 MEDIATION, ARBITRATION,CONCILIATION,LOK

ADALAT

11.1 COMPARISON BETWEEN ARBITRATION & MEDIATION

Although mediation and arbitration have the same goal in mind, a fair resolution of the issues at
hand, there are some major differences which both parties must understand beforehand.

The main difference between arbitration and mediation is that in arbitration the arbitrator hears
evidence and makes a decision. Arbitration is like the court process as parties still provide
testimony and give evidence similar to a trial but it is usually less formal. In mediation, the

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process is a negotiation with the assistance of a neutral third party. The parties do not reach a
resolution unless all sides agree.

Mediators do not issue orders, find fault, or make determinations. Instead, mediators help parties
to reach a settlement by assisting with communications, obtaining relevant information, and
developing options. Although mediation procedures may vary, the parties usually first meet
together with the mediator informally to explain their views of the dispute. Often the mediator
will then meet with each party separately. The mediator discusses the dispute with them, and
explores with each party possible ways to resolve it. It is common for the mediator to go back
and forth between sides a number of times. The main focus remains on the parties as they work
towards a mutually beneficial solution. Most disputes are successfully resolved and often the
parties will then enter into a written settlement agreement. Many people report a higher degree of
satisfaction with mediation than with arbitration or other court processes because they can
control the result and be part of the resolution.

Arbitration, on the other hand, is generally a more formal process than mediation. An arbitrator
could be a retired judge, a senior lawyer or a professional such as an accountant or engineer.
During arbitration, both parties are given an opportunity to present their cases to the arbitrator.
Much like a regular court proceeding, lawyers can also question witnesses from both sides.
During arbitration, there are usually little if any out-of-court negotiations between parties. The
arbitrator has the power to render a legally binding decision which both parties must honour and
the award is enforceable in our courts and the courts of 142 countries.

The difference between mediation and arbitration lies in the nature of the judgement taken by the
experts. While the decision taken by the arbitrator is binding on the parties, the mediator does not
make the judgement but helps the parties in arriving at an agreement.

The occurrence of the dispute is very common in every field not only in business, especially
when the issue is related to an opinion, unanimous agreement of the parties is rare. There are
various alternatives of dispute settlement, like conciliation, mediation, arbitration, adjudication,
collective bargaining and so on. Of these, mediation and arbitration are two processes which are
employed in lieu of litigation process, so as to resolve conflicts between the parties.

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Comparison Chart

BASIS FOR
MEDIATION ARBITARTION
COMPARISON

Meaning Mediation refers to a process of Arbitration is a substitute of public

resolving disputes wherein an trial, with no need of going court,
independent third party, assist wherein an independent third party
the parties involved in arriving at analyses the entire situation and makes
solution, agreeable to all. a decision binding on the parties.

Nature Collaborative Adversarial

Process Informal Formal

Role of expert Facilitator Judge

Number of expert One One or more

Private Meeting between the parties Only evidentiary hearings, no private

communication concerned and the counsel takes meetings with the arbitrator.
place jointly and separately.

Control over Parties Arbitrator

outcome

Basis of outcome Needs, rights and interest of Facts and evidences

parties

Outcome May or may not be reached. Definitely reached.

Decision The mediator does not pass any The decision of the arbitrator is final
judgement, but makes settlement and binding upon the parties.
only with the approval of parties.

Conclusion When the agreement is reached When the decision is handed down.
or parties are deadlocked.

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11.2 COMPARISON BETWEEN MEDIATION AND CONCILIATION

The basic difference between mediation and conciliation is based on the role played by the third
party who is selected by the parties seeking a settlement, in consensus. In mediation, the
mediator acts as a facilitator who helps the parties in agreeing. Conversely, in conciliation, the
conciliator is more like an interventionist who provides probable solutions to the parties
concerned, to settle disputes.

Alternate Dispute Resolution (ADR) is a dispute resolution method that employs non-adversarial
(i.e. out of court) ways to adjudicate legal controversies. ADR methods are informal, cheaper and
faster, in comparison to the traditional litigation process. It includes arbitration, conciliation,
mediation and negotiation.

Many think that conciliation and mediation are one and the same thing, but they are different, as
they are governed by different acts.

Comparison Chart

BASIS FOR
MEDIATION CONCILIATION
COMPARISON

Meaning Mediation is a process of Conciliation is a alternate dispute

resolving issues between parties resolution method in which an expert is
wherein a third party assist them appointed to settle the dispute by
in arriving at an agreement. persuading parties to reach agreement.

Regulated by Code of Civil Procedure, 1908 Arbitration and Conciliation Act, 1996

Basic element Confidentiality, that depends on Confidentiality, whose extent is fixed

trust. by law.

Third Party Acts as facilitator. Acts as facilitator, evaluator and

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BASIS FOR
MEDIATION CONCILIATION
COMPARISON

intervener.

Result Agreement between parties Settlement agreement

Agreement It is enforceable by law. It is executable as decree of civil court.

11.3 COMPARISON OF MEDIATION AND LOK ADALAT

1. Forum [where it takes place]

Mediation takes place in a private conference room. Only the parties, their advocates or
other persons helping them or accompanying them or involved in the mediation process
are present. Lok Adalat usually takes place in court premises when numerous cases
referred to Lok Adalat are listed before different conciliators. Often more than 25 cases
are placed before each group of conciliators. Lok Adalat proceedings are held in public,
in the presence of all persons assembled to attempt to settle their cases.

2. Morphology [Structure] of the process.

Mediation is a structured process featuring introductory comments by the mediator, [a]

detailed exchange of information in a joint session, a series of separate and private
meetings with the parties and an agreement stage.

In Lok Adalat, it is customary for the conciliators to talk with the parties, with their
advocates present, to help persuade the parties to settle their case. The exchange of
information is limited. The discussion of possible terms, likewise, is limited. If
conciliators talk with any party privately, it is generally only once, due to time constrains.

3. Who controls the Process?

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In mediation the mediator controls the process by following the stages of mediation
process and deciding the order or presentation, the length of presentation, setting the
agenda, etc. In Lok Adalat, the conciliators determine how the process will be handled,
which party speaks and when.
4. Who selects the neutral third party?

In mediation, generally the parties decide who will serve as the mediator.

In Lok Adalat, the parties do not have any role in deciding who the conciliators will be.
The parties appear before those conciliators to whom their case is assigned. The parties
do not have the freedom to select conciliators of their own choice.

5. Time spent in the process.

In mediation, parties are afforded reasonable time to negotiate the agreement. This may
involve a number of hours or days. Mediation may take place over a course of time to
accommodate the parties and the complexities of a dispute.

In Lok Adalat, there are usually strict time constraints. The agreement has to be reached
in fixed amount of time as the tenure of the conciliators is only for the given day. If there
is no settlement on that day, the case proceeds to trial. There is no continuity and follow
up by the conciliators.

6. Who controls the outcome?

In mediation, the parties control the outcome and work together in arriving at a settlement
with the assistance of the mediator. In Lok Adalat, the parties may usually agree to
disagree with a settlement proposed by conciliators. However, experience reveals that, in
practice, conciliators and advocates of the parties try to persuade the parties to settle.

7. How is a dispute referred to mediation? Who pays for the expenses?

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In mediation, reference to mediation is made by court order, by consent of the parties, or
pursuant to a contract clause, etc. The parties pay for mediation or the court pays for
mediation, if the programme provides funds.

In Lok Adalat, reference is made mostly by consent of the parties or their advocates.
Sometimes, a case placed before Lok Adalat by a court order. Parties may opt to appear
or not to appear. Parties do not pay for Lok Adalat expenses. Conciliators are free
volunteers. Arrangements or organisational expenses are mostly made and funded by
Legal Service Authorities.

8. Confidentiality

Mediation is a private process. Without consent of the parties, neither the parties nor the
mediator can disclose the statements made during mediation, or documents prepared for
mediation, such as mediation work.

In Lok Adalat, the process is generally not private. It takes place openly and in presence
of all others who have assembled for their respective cases.

9. Depth of Analysis.

In mediation, the factual and legal analysis is detailed and in depth.

Due to time constrains, conciliators in Lok Adalat are rarely able to engage in an
extensive discussion of a claim [ e.g., the precise nature of the claim, the factual
background and damages and possible settlement terms]

10. Types of disputes resolved.

In Mediation, all types of disputes, including commercial disputes, contract disputes

personal injury claims, real estate, probate etc., can be negotiated and resolved.

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In Lok Adalat, mainly motor accident claims and insurance claims are tackled.
Commercial and other disputes which require creative solutions are rarely referred to Lok
Adalat.

11. Role of a neutral.

In mediation, the neutral persons works in partnership with the parties to assist them in
finding a solution that meets with their needs, interests, priorities, future relationship, etc.

In Lok Adalat, conciliators attempt to persuade the parties to settle their case. There is no
attempt to work together with the parties solutions that meet with the parties' individual
needs, interests, priorities, future relationship etc.

12. Role of the parties.

In Mediation, parties play an active role in presenting factual background, discussing

positions, developing offers and counter offers, making decisions , etc.

Parties play no active role in Lok Adalat. They play no active role in presenting
information, identifying interests, making offers of settlement, responding to offers of
settlement and shaping the terms of settlement.

13. Role of Advocates.

In mediation, advocates play an active role, presenting the case, discussing positions,
developing offers and counter offers, and advising clients regarding terms of settlement.

In Lok Adalat, advocates play a part in advising their clients to settle if they consider it
advisable to settle.

14. Range of Possible Outcomes.

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 In mediation, parties are not bound by traditional legal remedies. Highly creative,
innovative and nontraditional solutions are possible. In addition, it is possible to build
future relationship by re-writing contracts, re-structuring relationship, etc.

Usually, in Lok Adalat the case is reduce to monetary damages. Imaginative solutions
involving non-monetary or non-traditional remedies are not usually considered.

CHAPTER-12 INTERPRETATION OF ALTERNATIVE DISPUTE

RESOLUTION BY INDIAN COURTS
Supreme Court in Afcons Infrastructure Limited v. Cherian Varkey Construction
Company Private Limited83 observed its reservation regarding literal interpretation of section
89 of Civil Procedure Code, 1908 and held that:

“If subsection (1) of Section 89 is to be literally followed, every trial Judge before
framing issues, is required to ascertain whether there exist any elements of a settlement
which may be acceptable to the parties, formulate the terms of settlement, give them to the

83
2010 (8) SCC 24

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 parties for observations and then reformulate the terms of a possible settlement before
referring it to arbitration, conciliation, judicial settlement, Lok

Adalat or mediation. There is nothing that is left to be done by the alternative dispute
resolution forum. If all these have to be done by the trial court before referring the parties
to alternative dispute resolution processes, the court itself may as well proceed to record
the settlement as nothing more is required to be done, as a Judge cannot do these unless he
acts as a conciliator or mediator and holds detailed discussions and negotiations
running into hours.”

Another judgment of Apex Court which is pertinent to mention is that of Salem Bar Assocation v
Union of India84 wherein the court held that there in an presumption under Section 89 with
respect to absence of arbitration agreement, the relevant excerpt from the said judgment is
reproduced hereinbelow:

“Arbitration is an adjudicatory dispute resolution process by a private forum, governed by

the provisions of the Act. The 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 CPC, the matter would have stood referred to arbitration
either by invoking Section 8 or Section 11 of the Act, and there would be no need to have
recourse to arbitration under Section 89 CPC. Section 89 therefore pre-supposes that there
is no pre-existing arbitration agreement. Even if there was no preexisting arbitration
agreement, the parties to the suit can agree for arbitration when the choice of ADR
processes is offered to them by the court under Section 89 CPC. Such agreement can be by
means of a joint memo or joint application or a joint affidavit before the Court, or by
record of the agreement by the Court in the order sheet signed by the parties. Once there is
such an agreement in writing signed by parties, the matter can be referred to arbitration
under Section 89 CPC; and on such reference, the provisions of Act will apply to the
arbitration”

Supreme Court in the case of Shailesh Dhairyawan v. Mohan Balkrishna Lulla85 differentiated
the mechanism of Mediation and Arbitration under Section 89 of Civil Procedure Code in
following terms:
84
AIR 2003 SC 189
85
(2016) 3 SCC 619
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 “Section 89 provides for alternate methods of dispute resolution i.e. those methods which
are alternate to the court and are outside the adjudicatory function of the court. One of
them with which we are concerned is the settlement of dispute through arbitration. Insofar
as reference of dispute to arbitration is concerned, it has been interpreted by this Court that
resort to arbitration in a pending suit by the orders of the court would be only when parties
agree for settlement of their dispute through arbitration, in contradistinction to the
Alternate Dispute Resolution mechanism (for short “ADR”) through the process of
mediation where the Judge has the discretion to send the parties for mediation, without
even obtaining the consent of the parties. Thus, reference to arbitration is by means of
agreement between the parties. It is not in dispute that there was an agreement between the
parties for reference of dispute to the arbitration and it was so referred.”

Furthermore, Supreme Court in the case of Haresh Dayaram Thakur v State of Maharashtra 86
discussing the ambit of Section 73 of Arbitration and Reconciliation Act held that:

“From the statutory provisions noted above the position is manifest that a conciliator is a
person who is to assist the parties to settle the disputes between them amicably. For this
purpose the conciliator is vested with wide powers to decide the procedure to be followed
by him untrammelled by the procedural law like the Code of Civil Procedure or the Indian
Evidence Act, 1872. When the parties are able to resolve the dispute between them by
mutual agreement and it appears to the conciliator that there exists an element of
settlement which may be acceptable to the parties he is to proceed in accordance with the
procedure laid down in Section 73, formulate the terms of a settlement and make it over to
the parties for their observations; and the ultimate step to be taken by a conciliator is to
draw up a settlement in the light of the observations made by the parties to the terms
formulated by him. The settlement takes shape only when the parties draw up the settlement
agreement or request the conciliator to prepare the same and affix their signatures to it.
Under sub-section (3) of Section 73 the settlement agreement signed by the parties is final
and binding on the parties and persons claiming under them. It follows therefore that a
successful conciliation proceeding comes to an end only when the settlement agreement
signed by the parties comes into existence. It is such an agreement which has the status and
effect of legal sanctity of an arbitral award under Section 74”

86
(2000) 6 SCC 179
121
The landmark decision of Supreme Court in the case of State of Punjab v Jalour Singh and
Ors.87 wherein the said court in categoric terms held that an award passed by Lok Adalat can be
only challenged qua a writ under Article 226/227 of the Constitution of India

Supreme Court in the Afcons Case(supra) also laid down very rightly the category of cases
which cannot be referred for ADR mechanism which includes cases involving public interest,
cases involving allegations of fraud etc.

In India with all the fancy endorsements with respect to Alternate Dispute Resolution mechanism
still the perception of general public is to approach the traditional courts instead of choosing
these alternative adjucatory forums therefore, for these mechanisms to gather more popularity it
is of utmost importance that they work in the manner which is best suited for the parties
involved.

Furthermore, there are enough loop holes in the current Arbitration and Reconciliation Act and
other laws relating to same which invariably aid the parties for setting aside of decision of the
concerned adjucatory body and therefore, the same needs to be curbed down in order to not
defeat the entire purpose of Alternate Dispute Resolution mechanism in India.

CHAPTER – 13 LOK ADALATS AS A UNIQUE ADR MEASURE IN

INDIA:

The emergence of alternative dispute resolution has been one of the most significant movements
as a part of conflict management and judicial reform, and it has become a global necessity.
Resolution of disputes is an essential characteristic for societal peace, amity, comity and
harmony and easy access to justice. It is evident from the history that the function of resolving
dispute has fallen upon the shoulders of the powerful ones. With the evolution of modern States
and sophisticated legal mechanisms, the courts run on very formal processes and are presided
over by trained adjudicators entrusted with the responsibilities of resolution of disputes on the
part of the State. The processual formalisation of justice gave tremendous rise to consumption of
87
(2008) 2 SCC 660
122
time and high number of cases and resultant heavy amount of expenditure. Obviously, this led to
a search for an alternative complementary and supplementary mechanism to the process of the
traditional civil court for inexpensive, expeditious and less cumbersome and, also, less stressful
resolution of disputes.

As such, ADR has been, a vital, and vociferous, vocal and vibrant part of our historical past.
Undoubtedly, Lok Adalat (Peoples' Court) concept and philosophy is an innovative Indian
contribution to the world jurisprudence. It has very deep and long roots not only in the recorded
history but even in prehistorical era. It has been proved to be a very effective alternative to
litigation. Lok Adalat is one of the fine and familiar fora which has been playing an important
role in settlement of disputes. The system has received laurels from the parties involved in
particular and the public and the legal functionaries, in general. It also helps in emergence of
jurisprudence of peace in the larger interest of justice and wider sections of society.88

Lok Adalat (people’s courts), established by the government settles dispute through conciliation
and compromise. The First Lok Adalat was held in Gujarat in 1982. Lok Adalat accepts the cases
which could be settled by conciliation and compromise, and pending in the regular courts within
their jurisdiction. The Lok Adalat is presided over by a sitting or retired judicial officer as the
chairman, with two other members, usually a lawyer and a social worker. There is no court fee.
If the case is already filed in the regular court, the fee paid will be refunded if the dispute is
settled at the Lok Adalat. The procedural laws, and the Evidence Act are not strictly followed
while assessing the merits of the claim by the Lok Adalat.

Main condition of the Lok Adalat is that both parties in dispute should agree for settlement. The
decision of the Lok Adalat is binding on the parties to the dispute and its order is capable of
execution through legal process. No appeal lies against the order of the Lok Adalat. Lok Adalat
is very effective in settlement of money claims. Disputes like partition suits, damages and
matrimonial cases can also be easily settled before Lok Adalat, as the scope for compromise
through an approach of give and take is high in these cases. Lok Adalat is a boon to the litigant
public, where they can get their disputes settled fast and free of cost. Parliament enacted the
Legal Services Authorities Act 1987, and one of the aims for the enactment of this Act was to

88
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organize Lok Adalat to secure that the operation of legal system promotes justice on the basis of
an equal opportunity. The Act gives statutory recognition to the resolution of disputes by
compromise and settlement by the Lok Adalats.

According to Legal Services Authorities (Amendment) Act 1994 effective from 09- 11-1995 has
since been passed, Lok Adalat settlement is no longer a voluntary concept. By this Act Lok
Adalat has got statutory character and has been legally recognized. Certain salient features of the
Act are enumerated below:-89

Section 19

1. Central, State, District and Taluk Legal Services Authority has been created who are
responsible for organizing Lok Adalats at such intervals and place.

2. Conciliators for Lok Adalat comprise the following: -

A. A sitting or retired judicial officer.

B. other persons of repute as may be prescribed by the State Government in consultation

with the Chief Justice of High Court.

Section 20: Reference of Cases

Cases can be referred for consideration of Lok Adalat as under:-

1. By consent of both the parties to the disputes.

2. One of the parties makes an application for reference.

3. Where the Court is satisfied that the matter is an appropriate one to be taken cognizance of by
the Lok Adalat.

4. Compromise settlement shall be guided by the principles of justice, equity, fair play and other
legal principles.

5. Where no compromise has been arrived at through conciliation, the matter shall be returned to
the concerned court for disposal in accordance with Law.

Section 21

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124
After the agreement is arrived by the consent of the parties, award is passed by the conciliators.
The matter need not be referred to the concerned Court for consent decree. The Act provisions
envisages as under:

1. Every award of Lok Adalat shall be deemed as decree of Civil Court.

2. Every award the dispute.

3. No appeal shall made by the Lok Adalat shall be final and binding on all the parties to lie from
the award of the Lok Adalat.

Section 22

Every proceedings of the Lok Adalat shall be deemed to be judicial proceedings for the purpose
of :- 1. Summoning of Witnesses.

2. Discovery of documents.

3. Reception of evidences.

4. Requisitioning of Public record.

Abraham Lincoln has observed:

"Discourage litigation. Persuade your neighbours to compromise wherever you can. Point out to
them how the nominal winner is often a real loser - in fees, expenses, and waste of time. As a
peacemaker, the lawyer has a superior opportunity of being a good man. There will still be
business enough."90

The concept of Lok Adalat was pushed back into oblivion in last few centuries before
independence and particularly during the British regime. This concept is, now, again very
popular and is gaining historical momentum. Experience has shown that it is one of the very
efficient and important ADRs and most suited to the Indian environment, culture and societal
interests. The finest hour of justice is the hour of compromise when parties after burying their
hatchet reunite by a reasonable and just compromise. This Indian-institutionalised, indigenised
and now, legalized concept for settlement of dispute promotes the goals of our Constitution.
Equal justice and free legal aid are hand in glove. It is, rightly said, since the second world war,

90
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125
the greatest revolution in the law has been the mechanism of evolution of system of legal aid
which includes an ADR. The statutory mechanism of legal services includes concept of Lok
Adalat in the Legal Services Authorities Act. The legal aid, in fact, is a fundamental human right.

Indian socio-economic conditions warrant highly motivated and sensitised legal service
programmes as large population of consumers of justice (heart of the judicial anatomy) are either
poor or ignorant or illiterate or backward, and, as such, at a disadvantageous position. The State,
therefore, has a duty to secure that the operation of legal system promotes justice on the basis of
equal opportunity. Alternative dispute resolution is, neatly, worked out in the concept of Lok
Adalat. It has provided an important juristic technology and vital tool for easy and early
settlement of disputes. It has again been proved to be a successful and viable national imperative
and incumbency, best suited for the larger and higher sections of the present society and Indian
system. The concept of legal services which includes Lok Adalat is a "revolutionary evolution of
resolution of disputes".

CHAPTER -14 ARBITRATION AND CONCILIATION ACT, 1996 AND

SECTION 89

There are various modes for the settlement of disputes in India. One such mode is the Alternative
Dispute Resolution modes which is summarized and formulated in terms of Section 89 of the
Civil Procedure Code. Alternative Dispute Resolution in itself involves Arbitration, Conciliation
and mediation. Section 89(2) provides that where a dispute has been referred for Arbitration or
Conciliation, the provisions of the Arbitration and Conciliation Act, 1996 would apply and thus,
it would imply that the proceedings of such a matter for Arbitration and Conciliation took place
under the provisions of the 1996 Act. The power of the Court to refer the parties to arbitration is
dealt by Section 8 of the 1996 Act. This however is subjected to the presence of an arbitration
agreement between the parties involved.

126
A point of difference between the Arbitration and conciliation Act and Section 89 of the code is
that under the Act, the parties would referred to arbitration whereas under the Code, the court
actually asks the parties to choose one or other ADRs including Arbitration and parties may
choose accordingly. Thus, Section 89 cannot be resorted to for interpreting Section 8, Arbitration
and Conciliation Act, 1996 as it stand son a different footing and it would be applicable even in
case where there is arbitration agreement.91 The High Court is empowered to make rules to all
proceedings before the Court under the provisions of the Arbitration and Conciliation Act, 1996
under Section 82. These rules however have to be consistent with the said Act. The same power
is conferred upon the Central Government under Section 84 of the Act. Contrary to this, when
parties agree to go for arbitration under section 89 of the code, the option of the parties to choose
arbitration and the procedure for the same is not contemplated by the Arbitration and
Conciliation Act, 1996 and Section 82 and 84 has no application under these circumstances.
Arbitration and Conciliation Act, 1996 would apply to proceedings only after the stage of
reference and not before the stage of reference when options are given under section 89 of the
code, if reference to arbitration is made by the parties under Section 89. Drawing analogy on the
same, it will be only after the stage of reference to conciliation that the 1996 Act pertaining to
conciliation would apply.

A similar analogy can be drawn with respect to the Legal Services Authority Act, 1987 or the
rules formed by the State government cannot act as impairment upon the High Court making
rules under Part X of the Code incorporating within itself the option that Lok Adalats can also be
made one the modes provided under Section 89. Similar to the Arbitration and Conciliation Act,
1996, the Legal services Authority Act, 1987 also does not provide to the parties the option to
choose one of the four ADR methods as mentioned in Section 89.Section 89 makes applicable
1996 Act and 1987 Act from the stage after exercise of options and making of reference.92 The
power under Section 89(1)(a) and 89(2)(a) to refer the parties for arbitration would and must
necessarily include , imply and inhere in it the power and jurisdiction to appoint the Arbitrator
also.When the Arbitration and Conciliation Act which is a special law provides for a forum to
adjudication, Section 89 Code of Civil Procedure cannot be resorted to refer a dispute for
arbitration unless there is mutual consent of all parties or arbitration agreement.93 It was also held

91
Sukanya Holdings Pvt. Ltd. v. H. Jayes Pandya : AIR 2003 SC 2252
92
Supra n. 5
93
Southern Structurals Ltd. v. K.S.E Board : 2008 (1) KLT 105 (F.B)
127
by a SC judgement that Section 5 of the Act does not debar a revision being filed against the
order passed by a civil court in an appeal under Section 37 of the act.94

As aforementioned, Section 89 of the Civil procedure Code cannot be used to interpret and
understand the provisions under Section 8 of the Arbitration and Conciliation Act,1996. Still, for
this purpose, the court has to apply its mind to the condition contemplated under Section 89 of
the Code and even if the application under Section 8 is rejected, the Court is bound to follow the
procedure as laid down under the said section.95

14.1 NO COMPULSION UNDER SECTION 89

Section 89 of the Code of Civil Procedure does not create an obligation for the Court to
necessarily conduct arbitration, but merely permits the Court to refer the dispute to arbitration or
conciliation etc., where it is satisfied with respect to a reference to the dispute in a pending suit
that there is a possibility of settlement of the same by way of arbitration or conciliation.

However, The Government of India or any party can create a compulsion or obligation on the
Civil Court to necessarily arbitrate the matter between the parties depending upon the nature of
the agreement entered by the parties. The fact that Government is one of the parties to the
arbitration agreement makes no difference.96 The mandate under Section 89 ought to be made to
settle the matter and every endeavor should be made for amicable settlement.97 It appears from
Section 89(1) of the code of Civil Procedure that a duty is cast upon the court to refer the dispute
either by way of arbitration, conciliation, judicial settlement including settlement through Lok
Adalats or mediation if it appears that there are elements of settlement.98

The constitutional validity of Section 89 of the Code was upheld by the Supreme Court of India
in Salem Advocate Bar Association, Tamil Nadu vs. Union of India.99 All endeavours shall be
made by the Court at the earliest point of time to settle the dispute under Section 89 of the Code
through any of the mechanisms provided under it.100 However, the Court cannot compel a party
to surrender to ADR if any of the part did not settle for settlement. Under the guise of this

94
.T.I.Ltd. v Siemens Public Communication Networks Ltd. AIR 2003 SC 2252
95
Supra, n.19
96
Supra, n.28
97
Sukhdev Singh Gambhir v. Amrit Pal Singh : 2003 (105) DLT 184
98
I. Basheer v. Kerala State Housing Board : 2004 IndLaw 238 (Ker.)
99
Supra n. 28
100
Supra n.37
128
provision, a party cannot be allowed to prolong the litigation when the trail is in progress and
more particularly when it is ready for disposal.101 The Parliament has not conferred the
jurisdiction on any personal designate but on regular Courts properly constituted which must be
held or assumed to be held by competent trained officials. When a reference has been made for
arbitration under Section 89(1) of the Code, it is to be kept in mind that it would thus bring the
suit to a termination before that Court and such decision will certainly be amenable to challenge
in revision even under Section 115 of the Code102. However, the above mentioned situation will
occur only if reasons are given and such reasons are considered by Superior Courts discharging
revisional and supervisory jurisdiction.103

14.2 APPLICABILITY OF PROVISIONS OF LOK ADALAT ACT

Section 89(2)(b) of the Code of Civil Procedure also provides that where a dispute has been
referred to the Lok Adalat, the Court shall refer the same to the Lok Adalat in accordance with
the provisions of sub-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 Lok Adalat.104 Parties
are entitled to refunding of full Court fee where the parties settled the matter without the
intervention of the Court.105 The Lok Adalats while resolving the disputes are guided by the
principles of justice, equity and fair play, and aim to settle the dispute by explaining the pros and
cons to the parties of their respective claims.106 Similar to the amendments made by the State
Government in Central Court Fee Act by virtue of the amendments to the code, the State
Government can also consider making similar amendments to State Court Fee Legislations.107

14.3 238TH LAW COMMISSION REPORT

The 238th Law Commission Report advocated for the same changes as were specified in Afcons
case and called for restructuring of the Section on the contours set out by the Supreme Court
with certain reservations. The Commission stated it would be unsuitable to deem a Lok Adalat as

101
Supra n.38
102
Supra n. 5
103
ibid
104
Kamalamma v. Honnali Taluk Agrl. Produce Co-op. Marketing Society Ltd., Honnali : AIR 2010 (NOC) 298
(Kar.)
105
Ibid
106
State of Pankuh v Jalour Singh (2008) 2 SCC 660: Santosh Gupta (Smt) v Life Insurance Corporation of India,
Bombay AIR 2004 NOC 118: (2003) AII-1( 4030 (P&H).
107
Supra n. 28
129
a mediator and treating the Lok Adalat award as a mere agreement arrived at on account of the
Mediato and stated that an appropriate course would be for the Mediator to submit the terms of
settlement reached as a result of mediation to the court so that the court, after due scrutiny, can
pass a decree in accordance with the compromise arrived at between the parties.108

The Report was deemed it be unwise to refer the award of Lok Adalat arrived at through
conciliation to be referred to a Court, which would be empowered to pass a decree in consonance
with the compromise arrived at. Such sort of an implementation, as prescribed under paragraph
38 of the Afcons case, would be in contravention with Section 21 of the LSA Act and further
review by courts is considered unwarranted. Such sort of a recommendation would even hamper
the conciliatory practices and go against the validity of settlement agreement as provided for
under Section 76 and 30 of the Arbtration and Conciliation Act. The objective of Section 89
shall be served if the further step of passing a decree with regard to Alternate forums is not
undertaken.

The Report called for a revamp of the current section to incorporate certain changes as had been
highlighted in the Afcons case such as court shall record its opinion in favor of ADR before
setting the issues to be dealt with in order to reduce the burden of the court. Copies of settlement
agreement need be provided to the courts by Conciliators to rectify any mistakes or errors in the
same with the consent of parties. (Recommendations 6.2)

The more important recommendation was with respect to rules under Order X, as the committee
recommended the removal of Rule 1B of Order X which calls for attendance of parties before
alternate forums. (Recommendation 6.3)

The Law Commission dealt with the problem of court fees as the literal interpretation of Section
16 of the Court-fees Act may render the trial of a suit free of cost. The said section, introduced
along with section 89 of the Code by the same Act, provides for court fees to be refunded to the
plaintiff when recourse to alternate forums is avoided. The problem lies in the fact that, there
may be no settlement or resolution by alternate forums and the matter may be reverted back to
the court and the suit may move on to trial proceedings without any fees or cost incurred by the
plaintiff. Such a provision is also in conflict section 21 of the Legal Services Authorities Act,
1987 as it provides for court fees being refunded only when a settlement is arrived at between
parties. Thus, parties while initiating proceedings, to avoid costs, could abuse the provision

108
Supra n. 26,pg 19
130
under Section 16 and a need to make this section in consonance with other such provisions such
as Section 20 of the LSLA act is paramount. The court fees must only be refunded when the
matter has been resolved outside court through alternate forums prescribed under Section 89. It
may be draftsmen’s error which has caused such a anomaly to arise but there is a need to alter
the same.( Recommendation 6.4.3)109

CHAPTER-15 CONCLUSION

The Parliament has enacted the Arbitration and Conciliation Act with a view to provide speedy
remedy by arbitration and to achieve this objective, section 5 of the Act puts a complete bar on
the intervention of the courts in matters where there exists an arbitration clause. The law of
arbitration in India is very much at its crossroads. As things stand today, arbitration is poised to
effect great changes to the ways in which dispute resolution is conducted. It brings with it the
solemnity and finality of the judicial process and couples it with the procedural flexibilities of
non-conventional dispute resolution methods. There is, however, an equally pressing need to
recognize that much more can and should be done to improve the conduct of arbitral proceedings
in India but most importantly, we feel that there is a need to effect a change in perceptions. As
our nation moves towards increasing litigiousness, alternative methods of dispute resolution

109
Ibid, pg27
131
might just provide the key to resolving the problems of overburdened case loads, long pendency
of cases and an all too frequent case of justice being delayed. For long, the problem plaguing the
effective implementation of ADR methods has been their perception as being subordinate to the
court process- a perception shared and fostered by lawyers and people alike. It is imperative, that
this be changed and this can only be achieved if there is active engagement from all the
stakeholders in this process.

The business and operating conditions in the present globalised economy underscore the
advantage of arbitration as a process of dispute resolution, over litigation, especially in cross-
border disputes.In theory, arbitration; whether international or national, has become the
duplication of a Court process that even provides for appeals. Further, the rulings in the Saw
Pipes and Venture Global cases clearly make it unfruitful for any investor or individual seeking
to arbitrate in India.

Indian legal system has significantly moved towards creating a facilitative environment for
enforcing foreign arbitral awards. Nevertheless, some improvements are necessary to bring India
in line with advanced legal regimes in the world and to provide for the needs of international
arbitration. The first step, in this regard, should be enacting legislation directly addressing
foreign arbitration as distinct from foreign court decisions and orders.

CHAPTER- 16 BIBLIOGRAPHY

PRIMARY SOURCES

1. Arbitration Act, 1940 [Repealed]

2. Arbitration and Conciliation Act, 1996
3. Code of Civil Procedure, 1908
4. Constitution of India, 1950

132
 5. Court Fees Act, 1870
6. Family Courts Act, 1984
7. Federal Arbitration Act, 1925
8. Gram Nyayalayas Act, 2008
9. Hindu Marriage Act, 1955
10. Indian Stamp Act, 1889
11. Industrial Disputes Act, 1947
12. Legal Services Authorities Act, 1987
13. Registration Act, 1908
14. The New York Convention, 1958
15. UNCITRAL Model Law

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134
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