ADR-MEANING, CONCEPT AND NEED

MEANING AND CONCEPT OF ADR

ADR is an abbreviation that stands for ‘Alternative Dispute Resolution’. ADR refers to all
those methods of solving disputes which are alternatives for litigation in the courts. It is an
attempt to device a machinery which should be capable of providing an alternative to the
conventional method of resolving dispute. ADR as the name suggest, is an alternative to
traditional process of dispute resolution through courts. It is the method of settlement of
dispute as an alternate to normal judicial method.
We can say that ADR refers to any means of setting disputes outside of the Court room, or
process that helps parties to resolve dispute without a trail.
DEFINITION AND CONCEPT
The process by which disputes between the parties are settled or brought to an amicable result
without the intervention of Judicial Institution and without any trail is known as Alternative
Dispute Resolution (ADR). It is a method which enables individuals and group to maintain
co-operation, social order and provides opportunity to reduce hostility.
The process of arbitration is not alien to India. It always had been practiced since time
immemorial. In ancient India when there was Kulas/CLAN, people used to live in joint
families with their clans and when there was caste system prevalent in the society. The
disputes among the kulas were resolved by the head of the of the family, clan or Kula.
Likewise, when there was common trade, corporations or Shrenis among the people, they
used to appoint person to resolve the disputes within the Shrenis.
HOW IT WORKS
ADR (alternative dispute resolution) usually describes dispute resolution where an
independent person (an ADR practitioner, such as a mediator) helps people in dispute to try
to sort out the issues between them. ADR can help people to resolve a dispute before it
becomes so big that a court or tribunal involved.
Generally, ADR uses neutral third party who helps the parties to communicate, discuss the
differences and resolve the dispute. Common ADR processes include mediation, arbitration,
and neutral evaluation. These processes are generally confidential, less formal, and less
stressful than traditional court proceedings.
ADR often saves money and speeds settlement. In mediation, parties play an important role
in resolving their own disputes. This often results in creative solutions, longer-lasting
outcomes, greater satisfaction, and improved relationships.
Alternative Dispute Resolution (ADR) Mechanisms

 While ADR mechanisms vary, they are typically not tied to a fixed procedural
framework because they favour practical solutions that require compromise and
negotiation. Furthermore, ADR processes are likely to be less expensive than
domestic courts or because as they are less legalized and do not require the
establishment of liability, specialized legal counsel will be un-necessary. In this sense
ADR is much more accessible and practical for use by civil society stakeholder
groups in the developing world.
  ADR is a mechanism of dispute resolution that is non adversarial,i.e. working
together co-operatively to reach the best resolution for everyone.
 ADR can be instrumental in reducing the burden of litigation on courts, while
delivering a well-rounded and satisfying experience for the parties involved.
 It provides the opportunity to "expand the pie" through creative, collaborative
bargaining, and fulfil the interests driving their demands.

NEED OF ADR
In India the courts are overloaded &over burdened, with the cases and new cases are being
filed every day but the cases are not being disposed in comparison to filling of the cases. It is
becoming impossible to decide all the cases by the court in speedy manner and this is not a
problem of India alone but today it is the global problem.
The common man is really unable to understand the complexity and techniques of a court of
law.He is totally depends upon his lawyer. Here the lawyer play a vital role, it is noted that
one of the reasons stated in the public is that the advocates are key persons in delaying the
cases. There is a Popular saying in the general public that majority of the advocates adopt the
procedure “collect, file and forget”. There may be several unavoidable reasons and
procedure for the delay like multiple rounds of appeals and revision make delay in getting
final decision from the court. But the allegation is made against the bar for the delay in the
court.
Against all these backdrop the mechanism of alternative dispute resolution are being
introduced because there was a need of a mechanism, which have been working effectively
and provides an amicable and speedy solution for conflicts of people. These procedures are
usually less costly and more expeditious. This method can be used in commercial and labour
disputes, divorce actions, in resolving tax-claims and in other disputes that would likely
otherwise involve court litigation.
Notably, due to various reasons the regular litigation has become awful on account of
lethargic, inadequately equipped judicial system. However, reasons that, why Alternative
Dispute Resolution is needed could be summarised as follows :—
(1)Amicable settlement of disputes.—It has been settled now that ADR provides a friendly
settlement of disputes. In business it is a prudent approach to have a competitor not a rival. In
business; wisdom do not have scope for enmity. It is clear that a healthy competition brings
improvement and it also effects cost of service or commodities in every sphere. In present
scenario even criminal matters are settled amicably. It would be relevant to mention the
concept of plea bargaining in the Code of Criminal Procedure, 1973 has been incorporated.
Meaning thereby that in term of compromise the compensation can be offered by accused to
the complainant and the Court of Law may put its seal of approval and pass the order
accordingly.
(2) Speedy disposal of dispute.—Alternative Dispute Resolution provides speedy disposal
of dispute. Under this system there is no much scope of adjournment, stay or lengthy session
of arguments etc.
(3) Economical settlement of dispute.—It delivers economical solution/settlement of
dispute. In other words litigation expenses and exorbitant counsel’s fees could be avoided by
invoking settlement of dispute by means of conciliation and mediation.
(4) A time saving management.—Alternative Dispute Resolution is also known as dispute
management. This is a time saving device, wherein dispute is being settled without following
the cumbersome procedure of ordinary litigation.
(5) Legal recognition.—This system has been recognised in the Indian Statutes. For instance
—now the Civil Procedure Code, 1908, Order XXXII-A, Rule 3 contains scope for
compromise and the decree evolved from that compromise is not appealable. Notably,
Section 12 of the Industrial Disputes Act, 1947 contemplated provision for conciliation as
pre-requisite for any pressure tactics/collective bargaining. In the same manner Section 23 of
the Hindu Marriage Act, 1955 provided the need for Alternative Dispute Resolution.
(6) Globalisation of commercial activities.—At present time the globalisation of
commercial activities is being campaigned not only in India but also in other countries like
U.S.A., U.K., Germany and France etc. Practically it is quiet difficult to get acquainted with
the foreign law. Therefore, dispute arising out of international commercial transactions
needed to be settled by negotiation, conciliation and meditation etc.
(7) Advent of multinational corporations.—A number of multinational corporations are
coming to invest and establish their business and also setting up their infrastructure. These
corporations have dynamic approach toward business activities. Therefore in case of dispute
arising, they should be provided with machinery which deals and resolve dispute amicably
and speedily. Hence, ADR is the only tool to settle dispute in question quickly and
economically,
(8) Industrialisation.—No doubt that in recent past we have witnessed a great magnitude of
industrialisation across the globe and India is not an exception to it. Thus, the reasons for
adoption of ADR cannot be postponed indefinitely. It is submitted that on account of
aforesaid reasons the need of ADR cannot be simply overlooked at threshold. Once
commercial transactions carried out it is natural to develop some conflict and differences and
approaching ordinary court of law will be a herculean task specifically in Indian Judicial
System. Hence, ADR contains way to come out while settling dispute in a most economical
and conducive manner.
However, in a broad perspective ADR is not only confined to settlement of commercial
dispute, even civil and criminal matter are settled by instrument of Lok Adalat, Nyaya
Panchayats and Panchayats in India.

The Characteristics of ADR Approaches

Although the characteristics of negotiated settlement, conciliation, mediation, arbitration, and

other forms of community justice vary, all share a few common elements of distinction from
the formal judicial structure. These elements permit them to address development objectives
in a manner different from judicial systems.
Informality

Most fundamentally, ADR processes are less formal than judicial processes. In most cases,
the rules of procedure are flexible, without formal pleadings, extensive written
documentation, or rules of evidence. This informality is appealing and important for
increasing access to dispute resolution for parts of the population who may be intimidated by
or unable to participate in more formal systems. It is also important for reducing the delay
and cost of dispute resolution. Most systems operate without formal representation.

Application of Equity

Equally important, ADR programs are instruments for the application of equity rather than
the rule of law. Each case is decided by a third party, or negotiated between disputants
themselves, based on principles and terms that seem equitable in the particular case, rather
than on uniformly applied legal standards.

Direct Participation and Communication between Disputants

Other characteristics of ADR systems include more direct participation by the disputants in
the process and in designing settlements, more direct dialogue and opportunity for
reconciliation between disputants, potentially higher levels of confidentiality since public
records are not typically kept, more flexibility in designing creative settlements, less power to
subpoena information, and less direct power of enforcement.

TYPES OF ADR

It is imperative to proceed with making distinction between the non binding and binding
opinions /resolutions of the different methods explored in the alternative dispute resolution
mechanism,

The binding opinion/ resolution as the name suggests binds the disputants to the decision
of the third party i.e. the conciliator, arbitrator or mediator.
The non-binding opinion/ resolution involves the disputants agreeing to allow the third
party to offer an opinion but that opinion wouldn’t bind the parties to the same.

1. Arbitration

The parties agree to yield their respective position through agreement or hearing to a neutral
third party for resolution. Here the parties provide testimony and evidence similar to a trial.
2. Mediation

Here the concerned parties seek to settle the dispute with the assistance of a mediator
amongst them. The agreement on the concerned dispute is reached on by an impartial third
party (professional) and is in the interest of all the involved disputants.

3. Conciliation

The parties get together to resolve the dispute amongst themselves and to a solution or
resolution. Conciliation differs from mediation in the sense of the main goal is to conciliate,
most of the time by seeking modifications and alterations to the parties’ positions without the
assistance of any third party involvement.

4. Lok Adalat

Here the cases pending in the court of law or at the pre-litigation stage are settled affably and
take place usually in the premises of the court.

5. Negotiation

Negotiation can be termed as a process via which disputing parties resolve disputes, concur
upon courses of action, negotiate for individual or collective advantage, and/or attempt to
craft outcomes which serve their mutual interests.

Alternative Dispute Resolution (ADR)

Arbitration
DEFINITIONS
Definition of Arbitration

Under Section 2 (1) (a) of the Arbitration and the Conciliation Act of 1996126 the
“arbitration” is defined as “arbitration means any arbitration whether or not administered by
permanent arbitral institution”. In other words arbitration is a process whereby with the
consent of the parties, the dispute is referred to the private tribunal, rather than to the Court
which is established by the ordinary process of law or it can also be stated that it is a
domestic tribunal different and distinct from a regularly organized Court.

Arbitration means settlement of dispute, outside court, by an individual or individuals, whom

both the parties trust. The agreement in writing which settles disputes is called an
Arbitration Agreement. In other words , an Arbitration Agreement is an agreement in
writing, which states that both parties agree to do arbitration and on the basis of this
agreement, the arbitrator passes the award.

The judgement given by Arbitrator is called Arbitral Award, and it is binding on both the
parties. Thus, Arbitration is an alternative solution to a Court Case. It is less expensive and
less time consuming. A sole arbitrator or more than one arbitrator is called Arbitral
Tribunal. But if there are more than one arbitrators , they should not be even in number. Its
main object is the final disposition of the dispute in a speedy manner. It is often difficult to
arrive at a universal acceptable definition of a concept as researchers usually have differing
points of view. Most legal scholars and writers on arbitration have avoided defining the
arbitration and have instead attempted to distinguish it from other methods of alternative
dispute resolution. Whilst there is no universal accepted comprehensive meaning of
arbitration, there is a general consensus about the characteristics or main features of
arbitration.

Principal characteristics of Arbitration

• Arbitration is one of the best methods for the settlement of disputes

Arbitration is the best available method for resolving all type of disputes particularly
commercial disputes. All over the world, arbitration has been accepted as the most
efficient method available to participants in national and international level is viewed by
parties as a cost effective, swift and

• An arbitration is Consensual or Semi- Consensual

Arbitration has to be created on the agreement of the disputants. Consent forms the very
foundation of arbitration proceedings - from beginning to end they are based on consent.
Not only does this mean that they must have consented to arbitrate the dispute that has
arisen between them, it also means that the authority and power of the arbitral tribunal is
limited to that which the parties have agreed. Consequently, the arbitral award rendered
by the tribunal have to resolve the dispute that was presented to it and have to not
pronounce on any issues or other disputes that may have arisen between the parties.

• Arbitration is a private procedure but not necessarily confidential

Arbitration is an important vehicle for the resolution of disputes, supported by a strong

national policy favouring the arbitration of disputes. One of the potential advantages of
the process is that it is private. Third parties can be prevented from observing the
proceedings..Parties to the arbitration can contract to prevent each other from disclosing
arbitration communications to third parties. It is true that arbitration proceedings
generally are private and do not produce published opinions comparable to the judgments
of courts. It is not correct, however, to assume that information revealed in arbitration is
automatically confidential.

However, the perception and preservation of confidentiality is not guaranteed as often,

and in most jurisdictions, it is only implied obligation not expressly provided for and
protected by law.

Some common law jurisdictions like the UK or Malaysia recognize the confidentiality of
arbitration whilst other likes Australia and the USA, have rejected the concept that
arbitration is subject to a confidentiality privilege
 • Arbitral award is final and binding on the disputant parties

An important characteristic of arbitration is that in most situations the award made by an

arbitral tribunal is final and binding upon the disputant parties: either because the
disputant parties have agreed this expressly in the arbitration clause, or because the
arbitration rules referred to by the disputant parties exclude any appeal against the award.

Essentials of Arbitral Award

 Should be in writing and should be signed by the members of the Arbitral
Tribunal.
 State reasons on which it is based
 Date and place of arbitration

Types of Arbitral Award

 Interim Award – This is a temporary award until the tribunal has given its final
decision. A provisional award can only be made if the parties have agreed that “the
tribunal may have the power to order on a provisional basis any relief which it would
have power to grant in a final award” (s.39 Arbitration Act 1996).
 Final Award – This should usually be in writing and signed by all the arbitrators. The
award must contain reasons and state where the arbitration took place. It must also be
dated (this is important for calculating interest on payments). Once the final award is
made this ends proceedings. “Last” award that disposes of all or all remaining issues
raised in the arbitration Effect – terminates the arbitration proceedings and mandate of
the arbitral tribunal (except in respect of error, ambiguity and omission which can be
fixed by an additional award)
 Domestic Award - The matters which may or may not be contractual but are related
as Domestic Arbitration and the award given after resolving the case by the Arbitration
system of India is regarded as Domestic Award. The domestic arbitration provides
domestic award.
 Foreign Award -A foreign award is made in an arbitration hearing held outside of
India. The term “foreign award” typically only has meaning when used to refer to a
contract that will be enforced outside of its country of origin.

Grounds on Which the Court Can Set Aside an Arbitral Award

A court may set aside an arbitral award on the grounds listed in section 34 of the Arbitration
and Conciliation Act, 1996. These factors include:
1. Incapacity of Parties
The award will not be binding on a party to the arbitration who is incapable of protecting his
own interests and who is not represented by a person who can do so, and in such a situation,
it may be set aside on that party’s application.
A party who is a juvenile or a person of unsound mind must be appropriately represented by a
guardian for the award to be upheld. The court will have to appoint a guardian for a youngster
or a person who is mentally ill for the purpose of arbitral proceedings under section 9 of the
Arbitration and Conciliation Act, 1996. When a guardian represents the incapacitated
individual, the basis for the incapacity will no longer be valid.
2. Invalidity of Arbitration Agreement
An agreement’s legality may be contested on any of the grounds on which the legality of the
contract may be contested. When an arbitration clause is part of a contract, the contract’s
invalidity renders the arbitration clause ineffective.
In State of UP vs Allied Constructions (2003), the court ruled that an agreement’s legality
must be determined in accordance with the laws that the parties have submitted. If there is no
such indication, the legality will be assessed under the applicable legislation.
3. Notice Not Given to Parties
As per section 34(2)(a)(iii) of the Arbitration and Conciliation Act, 1996, an award may be
challenged if a party did not get appropriate notice of the appointment of the arbitrator, the
arbitral procedures, or the party’s inability to submit his case for any other reason.
Dulal Poddar vs Executive Engineer, Dona Canal Division (2003) [AIR 2004 SC 1049]:
In this case, the court determined that the appellant’s request for the appointment of an
arbitrator without notifying the respondent, as well as the arbitrator’s ex-parte decision, were
unconstitutional and subject to review.
4. Award not in accordance with terms of submission
The scope of the arbitrator’s power and jurisdiction is specified by the reference of a dispute
under a contract. The award would be illegal and subject to modification if the arbitrator
claimed jurisdiction over matters which is not under his authority.
5. Arbitral Tribunal not properly constituted
As per Section 11(2) of the Act the parties to Arbitration Proceedings are free to choose the
procedure for appointment of Arbitrator/s however, for one party to claim the absolute right
to appoint an Arbitrator while the other party having no say is bad in law and against the very
essence of Alternate Dispute Resolution. The Hon'ble Supreme Court's decision in Perkins
Eastman Architects DPC and Ors. vs. HSCC (India) Ltd.6, deliberates over the equal power
of parties to appoint the arbitrator. The Court further observed that the exclusive right to
appoint an Arbitrator would ultimately introduce an element of partiality and bias which will
spill over to the Arbitral Award granted by that Arbitrator .
6. Subject matter of dispute not capable of settlement by arbitration under law
The existence of an arbitral dispute is a condition precedent for exercise of power by an
arbitrator. Only matters of indifference between the parties to litigation which affect their
private rights can be referred to arbitration. Therefore, matters of criminal nature, insolvency
proceedings, and matters of public rights cannot be decided by arbitration.
7. Award is in conflict with public policy of India
An award obtained by fraud or corruption would also be an award against the public policy of
India. An award obtained by suppressing facts, by misleading or deceiving the arbitrator, by
bribing the arbitrator, by exerting pressure on the arbitrator, etc. would be liable to be set
aside. The concept of public policy connotes some matter which concerns public good and
public interest. The Arbitral award can be set aside under Sections 34 and 37 of the Act, if the
award is found to be contrary to, (a) fundamental policy of Indian Law, or (b) the interest of
India, or (c) justice or morality, or (d) if it is patently illegal.

Limitation For Filing Application

Section 34(3) provides that an application for setting aside an arbitral award must be made
within 3 months of receiving the award or disposition of application by the arbitral tribunal.
The importance of this is emphasized by Section 36 which provides that the award becomes
enforceable as soon as the limitation period under Section 34 expires .

Enforcement of Award
If the time for setting aside the award has expired, the award can be enforced under CPC as if
it were a decree of the court.

Difference between Arbitration and Conciliation

Negotiation
Negotiation is a dispute where parties come together and then try to resolve their disputes by
means of mutual understanding and negotiations. The disputing parties have the choice to
appoint a negotiator or not. In case, a negotiator is appointed, he has a very small role to play
in getting the parties to a common understanding. Negotiation is not governed by law. All the
decisions regarding such negotiation, for instance, the time, procedure and place where the
negotiation will be conducted is totally up to the discretion of the parties.
Negotiation is one of the most commonly used forms of alternative dispute resolution as it is
preferred in non-profit organizations, businesses, government organizations, and legal
proceedings for instance in matters of divorce, adoption, etc.
Characteristics
a) Verbal Interaction - The disputing parties have the choice to appoint a negotiator or
not. In case, a negotiator is appointed, he has a very small role to play in getting the
parties to a common understanding.
b) No Of Parties - There is a minimum requirement of two parties to proceed for
negotiation.
c) Agreement- This process helps the conflicting parties by suggesting them better
results and also aid them in concluding a mutual agreement and settlement.
d) Conflict of Interest –There is a conflict of interest between the parties and in which
they seek as far as possible to preserve their interest rather adjust their views or
position by means of negotiation to achieve a settlement agreement.

Steps for Negotiation

1) Preparing and Planning
The primary step is the preparation and planning where the parties govern their goals for the
negotiation. Each party must decide the best alternative to a negotiated agreement and worst
alternative to a negotiated agreement . These two signify the extreme possibilities of the
situation. In this stage, all the information and details, relevant to the matter, are collected.

2) Opening
This is the second step of the process of negotiation. The parties will clear up and resolve any
misunderstanding about the situation. This step is an opportunity for informing and updating
the other party on the issues in the dispute. Both the disputants shed light on their demands to
ensure that the negotiation is properly done.

3) Bargaining and problem solving

The third step is bargaining and problem-solving. Bargaining and problem solving is the
spirit of negotiation as it is where the parties may take part or cooperate as they each pursue
to fulfill their interests. There is no single approach for a negotiation style. Diverse
bargaining styles and tactics are adopted depending upon the situation. The aim is to narrow
down rather bridge the gaps between the two initial positions and convinces the other party
to accept the same, however, it may be modified rather altered in the manner acceptable to
both the sides.

4) Closure and implementation

The last step is the validation of an agreement that has been worked out and elucidates how
the parties will supervise each other’s actions to ensure that the negotiated agreement is
carried out. The outcome of negotiation is reflected in this stage.

MEDIATION
Mediation, as used in law, is a form of alternative dispute resolution (ADR), a way of
resolving disputes between two or more parties with concrete effects. Typically, a third party,
the Mediator, assists the parties to negotiate a settlement. Disputants may mediate disputes in
a variety of domains, such as commercial, legal, diplomatic, workplace, community and
family matters.
The term "mediation" broadly refers to any instance in which a third party helps others reach
agreement. More specifically, mediation has a structure, timetable and dynamics that
"ordinary" negotiation lacks. The process is private and confidential, possibly enforced by
law. Participation is voluntary. The mediator acts as a neutral third party and facilitates rather
than directs the process.
Mediators use various techniques to open, or improve, dialogue between disputants, aiming
to help the parties reach an agreement. Much depends on the mediator's skill and training. As
the practice gained popularity, training programs, certifications and licensing followed,
producing trained, professional mediators committed to the discipline.
Mediation is an informal and flexible process in which a neutral third party - the mediator -
assists the opposing parties in reaching a voluntary, negotiated resolution of the complaint.
Mediation is different from other forms of dispute resolution in that the parties participate
voluntarily, and the mediator has no authority to make a decision. The decision-making
power rests in the hands of the parties.
It gives both parties an opportunity to discuss the issues raised in the complaint outside of a
formal hearing context. In mediation, the parties have a guided forum within which to
understand each other's needs and concerns and explore creative options for settlement
beyond the formal remedies OSC can obtain through litigation. Mediation helps identify
areas of agreement and ultimately incorporate those areas into a final resolution of the
complaint.

STAGES OF MEDIATION
Stage 1- Selection of Mediation Centre
Stage 2- Execution of Contract in mediation
Stage 3- Furnishing of information and correspondence
Stage 4-Meeting of Parties
Stage 5-Familiarising mediator with facts about dispute
Stage6-Gathering Information
Stage7-Facilitating Negotiations
Stage8-A stage of Impasse
Stage9-Termination of mediation or achieving agreement
Stage10-Post Termination stage

Advantages of Mediation
1. Flexible
It is a flexible process that provides parties access to a wide range of outcomes that are not
available in litigation. For example, courts will usually order one party to pay money to the
other party, whereas in mediation the parties come to their own agreement and other things
can be taken into account.
2. Speedy
Mediation can be carried out relatively quickly compared to litigation, taking on average
between 1 to 2 days. Mediations are scheduled promptly.
3. Confidential
Unlike the potential publicity of court proceedings, everything said at the mediation is
entirely confidential to the parties (unless specifically agreed otherwise). All the
information and evidence presented during mediation is kept confidential thus outside
parties do not have access to the mediation proceedings. Data given to the mediator
cannot be used for any other purpose besides helping the mediator to reach an appropriate
resolution. It is a confidential process and anything discussed at mediation is considered
‘without prejudice’ and therefore cannot be used as evidence in any subsequent tribunal.
4. Neutral
Mediators are trained in working with difficult situations. The mediator acts as a neutral
facilitator and supports each party through the process. The Mediator has to be neutral
throughout the process of mediation .His main objective is to assist the parties in achieving
neutrally acceptable resolution of dispute.
 5. Root Causes of the Problems
Mediation deals with the root causes of the problems or conflicts. Settlement through
mediation is lasting because the parties are encouraged to think about the basic reasons of
dispute.
6. Reduces Tensions
Mediation is a means of reducing tension in the community. Mediators attempt to reduce
social conflict before it escalates into the violence. Mediation can allow each party to hear the
opposing view in a non-confrontational environment .
7. Both Parties are Winners
The process will attempt to preserve the relationship between the parties .It is the parties
involved in the mediation process that arrive at a final solution and not the mediator.
Mediation helps participants focus on effectively communicating with each other as opposed
to attacking each other. Neither of the parties loses and the interests of both the parties are
conserved. It is a win-win situation for both parties. The parties control the end result of the
mediation.

Types of Disputes Resolved by Mediation

1. Aviation , Banking and Finance
2. Business Disputes Charities
3. Commercial agencies, Commercial Contracts
4. Information Technology, Insolvency and Bankruptcy
5. Environment Issues
6. Clinical & Medical Negligence
7. Landlord & Tenant, Leasing & Supply Contracts
8. Neighbors Disputes
9. Oil & Gas Contracts
10. Railway Industry, Transport Regulatory Disputes