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Alternative Dispute Resolution(ADR)

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    19th Jan, 2021
Alternative Dispute Resolution(ADR)


“I realized that the true fiction of a lawyer was to unite parties… A large part of my time during the 20 years of my practice as a lawyer was occupied in bringing out private compromise of hundreds of cases. I lost nothing thereby- not even money, certainly not my soul.”

– Mahatma Gandhi

Dispute resolution is the process of deciding a dispute or a conflict that has arisen between transacting parties. The decision can be arrived at either in an amicable manner or adversarial manner, either by the parties themselves or a neutral third party. The differences between the parties are addressed by dealing with their transaction-related interests.

Broadly, there are three methods of dispute resolution:

  • Traditional Dispute Resolution
  • Alternate Dispute Resolution
  • Hybrid Methods of Dispute Resolution

While the traditional dispute resolution method or litigation refers to the proceedings before an appropriate court of law according to the procedure established, the alternative methods are more flexible and party-centric and include negotiation, mediation, conciliation and arbitration. Hybrid-methods, as the name implies are a cross-over between two alternative methods of dispute resolution.


Alternative Dispute Resolution (ADR) is the procedure for settling disputes without litigation, such as arbitration, mediation, or negotiation. ADR procedures are usually less costly and more expeditious. They are increasingly being utilized in disputes that would otherwise result in litigation, including high-profile labor disputes, divorce actions, and personal injury claims.

One of the primary reasons parties may prefer ADR proceedings is that, unlike adversarial litigation, ADR procedures are often collaborative and allow the parties to understand each other's positions. ADR also allows the parties to come up with more creative solutions that a court may not be legally allowed to impose.

Basic Terms:

Arbitration - A process similar to an informal trial where an impartial third party hears each side of a dispute and issues a decision; the parties may agree to have the decision be binding or non-binding

Binding and Non-Binding - A binding decision is a ruling that the parties must abide by whether or not they agree with it; a non-binding decision is a ruling that the parties may choose to ignore

Arbitrator - An impartial person given the power to resolve a dispute by hearing each side and coming to decision

Hearing - A proceeding in which evidence and arguments are presented, usually to a decision-maker who will issue ruling

Mediation - A collaborative process where a mediator works with the parties to come to a mutually agreeable solution; mediation is usually non-binding.

Types of ADR:

  1. Arbitration
  • The dispute is submitted to an arbitral tribunal which makes a decision (an "award") on the dispute that is mostly binding on the parties.
  • It is less formal than a trial, and the rules of evidence are often relaxed.
  • Generally, there is no right to appeal an arbitrator's decision.
  • Except for some interim measures, there is very little scope for judicial intervention in the arbitration process.
  1. Conciliation
  • A non-binding procedure in which an impartial third party, the conciliator, assists the parties to a dispute in reaching a mutually satisfactory agreed settlement of the dispute.
  • Conciliation is a less formal form of arbitration.
  • The parties are free to accept or reject the recommendations of the conciliator.
  • However, if both parties accept the settlement document drawn by the conciliator, it shall be final and binding on both.
  1. Mediation
  • In mediation, an impartial person called a "Mediator" helps the parties try to reach a mutually acceptable resolution of the dispute.
  • The mediator does not decide the dispute but helps the parties communicate so they can try to settle the dispute themselves.
  • Mediation leaves control of the outcome with the parties.
  1. Negotiation
  • A non-binding procedure in which discussions between the parties are initiated without the intervention of any third party with the object of arriving at a negotiated settlement to the dispute.
  • It is the most common method of Alternative Dispute Resolution.
  • Negotiation occurs in business, non-profit organizations, government branches, legal proceedings, among nations and in personal situations such as marriage, divorce, parenting, and everyday life.
  1. Lok Adalat
  • An interesting feature of the Indian legal system is the existence of voluntary agencies called Lok Adalats (Peoples' Courts).
  • The Legal Services Authorities Act was passed in 1987 to encourage out-of-court settlements, and the new Arbitration and Conciliation Act was enacted in 1996.
  • Lok Adalat or "People's Court" comprises an informal setting which facilitates negotiations in the presence of a judicial officer wherein cases are dispensed without undue emphasis on legal technicalities.
  • The order of the Lok-Adalat is final and shall be deemed to be a decree of a civil court and shall be binding on the parties to the dispute.
  • The order of the Lok-Adalat is not appealable in a court of law

ADR in India


In India, the law and practice of private and transactional commercial disputes without court intervention can be dated back to ancient times. Arbitration or mediation as an alternative to dispute resolution by municipal courts has been prevalent in India from Vedic times.

The earliest known treatise is the Bhradarnayaka Upanishad, in which various types of arbitral bodies viz (i) the Puga (ii) the Sreni (iii) the Kula are referred to. These arbitral bodies, known as Panchayats, dealt with variety of disputes, such as disputes of contractual, matrimonial and even of a criminal nature. The disputants would ordinarily accept the decision of the panchayat and hence a settlement arrived consequent to conciliation by the panchayat would be as binding as the decision that was on clear legal obligations.

The Muslim rule in India saw the incorporation of the principles of Muslim law in the Indian culture. Those laws were systematically compiled in the form of a commentary and came to be known as Hedaya. During Muslim rule, all Muslims in India were governed by Islamic laws- the Shari’ah as contained in the Hedaya. The Hedaya contains provisions for arbitration as well.

The Arabic word for arbitration is Tahkeem, while the word for an arbitrator is Hakam. An arbitrator was required to posses the qualities essential for a Kazee– an official Judge presiding over a court of law, whose decision was binding on the parties subject to legality and validity of the award. The court has the jurisdiction to enforce such awards given under Shari’ah though it is not entitled to review the merits of the dispute or the reasoning of the arbitrator.

ADR picked up pace in the country, with the coming of the East India Company. The British government gave legislative form to the law of arbitration by promulgating regulations in the three presidency towns: Calcutta, Bombay and Madras. 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. These remained in force till the Civil Procedure Code 1859, and were extended in 1862 to the Presidency towns.

Legislations of ADR in India

Code of Civil Procedure

 The Code of Civil Procedure, 1859 in its sections 312 to 325 dealt with arbitration in suits while sections 326 and 327 provided for arbitration without court intervention. The Code of Civil Procedure (Act 5 of 1908) repealed the Act of 1882. The Code of Civil Procedure, 1908 has laid down that cases must be encouraged to go in for ADR under section 89(1). Under the First Schedule, Order XXXII A, Rule 3 a duty is cast upon the courts that it shall make an endeavor to assist the parties in the first instance, in arriving at a settlement in respect of the subject matter of the suit.

The second schedule related to arbitration in suits while briefly providing arbitration without intervention of a court. Order I, Rule 1 of the schedule says that where in any suit, all the parties agree that any matter in difference between them shall be referred to arbitration, they may, at any time before judgment is pronounced; apply to the court for an order of reference. This schedule, in a way supplemented the provisions of the Arbitration Act of 1899.

Arbitration and Conciliation Act, 1996:

 The government enacted the Arbitration and Conciliation Act, 1996 in an effort to modernize the 1940 Act. In 1978, the UNCITRAL Secretariat, the Asian African Legal Consultative Committee (AALCC), the International Council for Commercial Arbitration (ICCA) and the International Chamber of Commerce (ICC) met for a consultative meeting, where the participants were of the unanimous view that it would be in the interest of International Commercial Arbitration if UNCITRAL would initiate steps leading to the establishment of uniform standards of arbitral procedure.

The preparation of a Model Law on arbitration was considered the most appropriate way to achieve the desired uniformity. The full text of this Model Law was adopted on 21st June 1985 by UNCITRAL. This is a remarkable legacy given by the United Nations to International Commercial Arbitration, which has influenced Indian Law. In India, the Model Law has been adopted almost in its entirety in the 1996 Act.

Legal Services Authorities Act, 1987:

The Legal Services Authorities Act, 1987 was brought into force on 19 November 1995. The object of the Act was to provide free and competent legal services to the weaker sections of the society to ensure that opportunities for securing justice are not denied to any citizen. The concept of legal services which includes Lok Adalat is a revolutionary evolution of resolution of disputes.

Though settlements were affected by conducting Lok Nyayalayas prior to this Act, the same has not been given any statutory recognition. But under the new Act, a settlement arrived at in the Lok Adalats has been given the force of a decree which can be executed through Court as if it is passed by it. Sections 19, 20, 21 and 22 of the Act deal with Lok Adalat. Section 20 provides for different situations where cases can be referred for consideration of Lok Adalat.

Advantages of Alternative Dispute Resolution:

  • More flexibility- In the case of arbitration, the parties have far more flexibility to select what procedural and discovery rules will apply to their dispute.
  • Select your own Arbitrator or Mediator- The parties can often select the arbitrator or mediator that will hear their case, typically selecting someone with expertise in the substantive field involved in the dispute. The arbitrator (or panel members) need not even be an attorney.
  • A jury is not involved- Juries are unpredictable and often damage awards are based solely on whether they like the parties or are upset at one party because of some piece of evidence such as a photo that inflames the passion of the jury.
  • Expenses are reduced- Attorneys and expert witnesses are very expensive. Litigating a case can easily run into the tens of thousands of dollars.
  • ADR is speedy- Trials are lengthy, and in many states and counties it could take years to have a case heard by a judge or jury. Appeals can then last months or years after that. In a matter of hours, an arbitrator often can often hear a case that otherwise may take a week in court to try with live witnesses. With arbitration, the evidence can be submitted by documents rather than by testimony presented through witnesses.
  • The results can be kept confidential- The parties can agree that information disclosed during negotiations or arbitration hearings cannot be used later even if litigation ensues. The final outcome can also be made private if the parties so stipulate and agree. On the other hand, most trials and related proceedings are open to the public and the press.
  • Party participation- ADR permits more participation by the litigants. ADR allows the parties the opportunity to tell their side of the story and have more control over the outcome than normal trials overseen by a judge. Many parties desire the opportunity to speak their piece and tell their side of the story in their own words rather than just through counsel.
  • Fosters cooperation- ADR allows the parties to work together with the neutral arbitrator or mediator to resolve the dispute and come to a mutually acceptable remedy.
  • Less stress- ADR is often less stressful than expensive and lengthy litigation. Most people have reported a high degree of satisfaction with ADR.

Disadvantages of ADR:

  • There is no guaranteed resolution- With the exception of arbitration, alternative dispute resolution processes do not always lead to a resolution.
  • Arbitration decisions are final- With very few exceptions, the decision of a neutral arbitrator cannot be appealed, with fraud being an obvious exception
  • Limits on Arbitration Awards- Arbitrators can only resolve disputes that involve money. They cannot issue orders compelling one party to do something, or refrain from doing something (also known as injunctions). For example, Arbitrators generally cannot change title to real property. Of course this is subject to the specific language of the arbitration clause.
  • Discovery limitations- Some of the procedural safeguards designed to protect parties in court may not be present in ADR, such as the liberal discovery rules used in U.S. courts, which make it relatively easy to obtain evidence from the other party in a lawsuit.
  • Fee for the Neutral- The neutral mediator or arbitrator charges a fee for his or her services. Depending on the arbitrator or mediator selected, the fees can be substantial (of course the parties typically agree to divide the fees between themselves).
  • Non-binding arbitration- Sometimes the court may order nonbinding or Judicial Arbitration. This means that if a party is not satisfied with the decision of the arbitrator, they can file a request for trial with the court within a specified time period after the arbitration award.

Suggestions for improving ADR mechanisms:

  • Courts are authorized to give directives for the adoption of ADR mechanisms by the parties and for that purpose Court has to play important role by way of giving guidance. Power is also conferred upon the courts so that it can intervene in different stages of proceedings. But these goals cannot be achieved unless requisite infrastructure is provided and institutional frame work is put to place.
  • The institutional framework must be brought about at three stages, which are:

Awareness: It can be brought about by holding seminars, workshops, etc. ADR literacy program has to be done for mass awareness and awareness camp should be to change the mindset of all concerned disputants, the lawyers and judges.

Acceptance: In this regard training of the ADR practitioners should be made by some University together with other institutions. Extensive training would also be necessary to be imparted to those who intend to act as a facilitator, mediators, and conciliators. Imparting of training should be made a part of continuing education on different facets of ADR so far as judicial officers and judges are concerned.

Implementation: For this purpose, judicial officers must be trained to identify cases which would be suitable for taking recourse to a particular form of ADR.

  • ADR Mechanisms to be made more viable: The inflow of cases cannot be stopped because the doors of justice cannot be closed. But there is a dire need to increase the outflow either by strengthening the capacity of the existing system or by way of finding some additional outlets.
  • Setting up of Mediation Centers in all districts of each state with a view to mediate all disputes will bring about a profound change in the Indian Legal system. These Mediation centres would function with an efficient team of mediators who are selected from the local community itself.
  • Not many Indians can afford litigation. This kind of state of affairs makes common people, especially rural people, cynical about judicial process. We must take the ADR mechanism beyond the cities. Gram Nyayalayas should process 60 to 70 percent of rural litigation leaving the regular courts to devote their time to complex civil and criminal matters.
  • More and more ADR centres should be created for settling disputes out-of-court. ADR methods will achieve the objective of rendering social justice to the people, which is the goal of a successful judicial system.
  • The major lacuna in ADR is that it is not binding. One could still appeal against the award or delay the implementation of the award. “Justice delayed is justice denied.” The very essence of ADR is lost if it is not implemented in the true spirit. The award should be made binding on the parties and no appeal to the court should be allowed unless it is arrived at fraudulently or if it against public policy.


With the advent of the alternate dispute resolution, there is new avenue for the people to settle their disputes. The settlement of disputes in Lok Adalat quickly has acquired good popularity among the public and this has really given rise to a new force to ADR and this will no doubt reduce the pendency in law Courts. There is an urgent need for justice dispensation through ADR mechanisms.

The ADR movement needs to be carried forward with greater speed. This will considerably reduce the load on the courts apart from providing instant justice at the door-step, without substantial cost being involved. If they are successfully given effect then it will really achieve the goal of rendering social justice to the parties to the dispute.