What is Alternative Dispute Resolution (ADR)?

Alternative Dispute Resolution (ADR) refers to any procedure that resolves a dispute without
resorting to litigation. Simply put, it is a method of resolving a dispute or claim outside of the
courtroom. Before pursuing ADR, both parties must agree on it. Alternative Dispute Resolution (ADR)
methods typically involve the use of a neutral third party to assist in reaching a resolution.

ADR During the British Colonial Period in India

Under British rule, ADR was not entirely abandoned. The British recognised the effectiveness of
arbitration, especially in commercial disputes. Early legislative attempts to formalise ADR
mechanisms can be traced back to the Bengal Regulations of 1772, 1780, and 1781. These
regulations encouraged arbitration as a means of resolving disputes in the British-administered
territories of Bengal, Bombay, and Madras. Arbitration was seen as a politically safe and convenient
method to maintain order and manage disputes within the growing trading community.

In 1899, the Indian Arbitration Act was passed, based on the English Arbitration Act of 1889. It was
the first comprehensive legislation on arbitration in India. However, its scope was limited to the
presidency towns of Calcutta, Bombay, and Madras. The Act provided for arbitration in civil disputes,
but it was criticised for being deficient and was subject to various judicial criticisms.

ADR Post-Independence: The Modern Legal Framework

The 1980s marked a significant period in the evolution of ADR in India. In 1982, the concept of Lok
Adalats (people’s courts) was introduced in the state of Gujarat to promote out-of-court settlements.
Lok Adalats were designed as informal tribunals where parties could resolve disputes without the
formalities of a courtroom.

In 1987, the Legal Services Authorities Act was enacted, providing statutory recognition to Lok
Adalats and making them a permanent part of the Indian legal system. Lok Adalats primarily handled
small civil disputes, including family matters and petty criminal cases, and their decisions were
binding on the parties involved. The introduction of Lok Adalats was a crucial step in institutionalising
ADR mechanisms in India.

Arbitration and Conciliation Act, 1996: A New Era for ADR in India

In the context of increasing globalisation and India’s integration into the world economy, the need for
a modern and effective ADR system became evident. The Arbitration and Conciliation Act of
1996 was a landmark development in the history of ADR in India. It replaced the Arbitration Act of
1940 and brought India’s arbitration laws in line with the UNCITRAL Model Law on International
Commercial Arbitration.

The 1996 Act streamlined arbitration procedures and provided a comprehensive framework for both
domestic and international arbitration. It also introduced the concept of conciliation, allowing
parties to settle disputes through a neutral third party. The Act aimed to make arbitration quicker,
less expensive, and more efficient, catering to the needs of both individuals and businesses.
Advantages of ADR

Alternative Dispute Resolution (ADR) provides numerous advantages, and hence it is a popular
method for resolving disputes away from the conventional courtroom. Some of the major benefits of
applying ADR are as follows:

1. Affordable

One of the significant advantages of ADR is that it tends to be less costly than litigation. Litigation
may be costly because of attorney's fees, fees to the court, and other costs. ADR, particularly
modalities such as mediation, tends to be less expensive. The process tends to be faster, making
overall expenditures less.

2. Time-Saving

ADR processes are faster than litigation. Court proceedings take months or even years, depending on
the case's complexity and the court system's backlog. ADR processes, on the other hand, can be
done in weeks or a few months. This speed is advantageous to both parties, particularly when speed
is necessary.

3. Confidentiality

In contrast to court cases, which are normally public, ADR processes are confidential. The
proceedings and results in ADR are confidential. This is particularly helpful to businesses and
individuals who would like to maintain their reputation and not want to disclose sensitive
information to the public. The secrecy of ADR can create a less tense environment for parties to
negotiate and resolve conflicts.

4. Control and Flexibility

ADR offers greater control over the process. The parties can select their mediator or arbitrator,
establish time frames, and agree on resolution terms. This is a flexibility that enables the parties to
discover solutions that better fit their requirements than a stiff court order. It also fosters
cooperation and can lead to more innovative solutions.

5. Maintenance of Relationships

In most situations, particularly business or family conflicts, the relationship between the two parties
is key. ADR, especially mediation, emphasizes negotiation and compromise. This emphasis on
cooperation instead of confrontation serves to maintain relationships. It encourages comprehension
and respect, which may be strained in the courtroom environment.

6. Increased Rate of Success

ADR tends to enjoy a greater rate of success where disputes are resolved. Since it promotes
cooperation, the parties stand a better chance of reaching a compromise that benefits both parties.
Mediation, in fact, has high rates of success due to the fact that it is less formal and results in win-
win situations.

How ADR supports the Indian Judiciary.

• Reduces the filing of new cases: ADR helps to prevent disputes before they need the courtroom by
resolving it as early as possible.
• Solves disputes without the need of formal trials: ADR solves disputes formally as well as informally
without the need of formal trials. For example, Negotiation.

• Builds public trust: ADR offers efficient and effective solution, ADR helps build confidence in Indian
Judiciary system by showing that justice can time accessible and fair.

• Ensure speedy hearing: ADR provides speedy hearing as traditional trials can be time consuming
and delayed.

• Lowers legal costs: The cost of legal paper work is low. As ADR involves less documentation and
more mutual understanding between the parties.

• Eases the burden on Indian courts: ADR supports Indian Judiciary by resolving the cases outside the
courts and help legal courts to focus on complex cases.

• Supports the balance and efficiency: ADR helps by contributing to the efficient distribution of cases
and balancing an ideal cases judge-to-case ratio in the Indian Judiciary.

Limitations of Alternative Dispute Resolution (ADR)

1. Lack of Binding Precedent – ADR decisions do not create legal precedents, which limits their
usefulness in clarifying or developing the law.

2. Limited Scope for Appeal – Most ADR outcomes, especially arbitration awards, have very
restricted grounds for appeal, even if errors occur.

3. Power Imbalance Between Parties – ADR may disadvantage weaker parties where there is
unequal bargaining power, particularly in mediation or negotiation.

4. Absence of Formal Safeguards – Informal procedures may lack strict rules of evidence and
procedure, potentially affecting fairness and consistency.

5. Non-suitability for Certain Disputes – ADR is inappropriate for disputes involving serious
criminal matters, constitutional questions, or issues of public importance.

6. Enforcement Issues – While arbitral awards are enforceable, mediation or conciliation

7. Cost Concerns in Arbitration – Arbitration can become as expensive and time-consuming as

8. Confidentiality Concerns – Excessive confidentiality may conceal unfair practices or matters

9. Dependence on Party Cooperation – ADR processes rely heavily on the willingness and good
faith of parties; lack of cooperation can lead to failure.

10. Limited Awareness and Expertise – Inadequate knowledge about ADR mechanisms and lack
of trained mediators or arbitrators can reduce effectiveness.
ARBITRATION

The process of Arbitration cannot exist without valid arbitration agreement prior to the emergence
of dispute. In this technique of resolution parties refer their dispute to one or more persons called
arbitrators. Decision of arbitrator is bound on parties and their decision is called ‘Award’. The object
of Arbitration is to obtain fair settlement of dispute outside of court without necessary delay and
expense.

Any party to a contract where arbitration clause is there, can invoke arbitration clause either himself
or through their authorized agent which refer the dispute directly to the arbitration as per the
Arbitration clause. Here, arbitration clause means a clause that mention the course of actions,
language, number of arbitrators, seat or legal place of the arbitration to be taken place in the event
of dispute arising out between the parties.

MEDIATION

Mediation is an alternative method of dispute resolution where a third neutral party aims to assist
two or more disputants in reaching agreement. It is an easy and uncomplicated party centered
negotiation process where third party acts as a mediator to resolve dispute amicably by using
appropriate communication and negotiation techniques. This process is totally controlled by the
parties. Mediator’s work is just to facilitate the parties to reach settlement of their dispute. Mediator
doesn’t impose his views and make no decision about what a fair settlement should be.

Stages of Mediation –

1. Opening statement - Initially in the opening statement he furnishes all the information about his
appointment and declares he does not have any connection with either of parties and has no interest
in the dispute.

2. Joint Session - In the joint session, he gathers all the information, understand the fact and issues
about the dispute by inviting both the parties to present their case and put forward their perspective
without any interruption. In this session, mediator tries to encourage and promote communication
and manage interruption and outbursts by the parties.

3. Separate Session - Here he tries to understand the dispute at a deeper level, gathers specific
information by taking both the parties in confidence separately. Mediator asks frequent questions on
facts and discusses strengths and weaknesses to the parties of their respective cases.

4. Closing - After hearing both the sides, mediator starts formulating issues for resolution and
creating options for settlement. In the case of failure to reach any agreement through negotiation in
mediation, mediator uses different Reality check technique like:

CONCILIATION

Conciliation is a form of arbitration but it is less formal in nature. It is the process of facilitating an
amicable resolution between the parties, whereby the parties to the dispute use conciliator who
meets with the parties separately to settle their dispute. Conciliator meets separately to lower the
tension between parties, improving communication, interpreting issue to bring about a negotiated
settlement. There is no need of prior agreement and cannot be forced on party who is not intending
for conciliation. It is different from arbitration in that way.
LOK ADALAT

Lok Adalat is called ‘People’s Court’ presided over by a sitting or retired judicial officer, social activists
or members of Legal profession as the Chairman. National Legal Service Authority (NALSA) along with
other Legal Services Institutions conducts Lok Adalats on regular intervals for exercising such
jurisdiction. Any case pending in regular court or any dispute which has not been brought before any
court of law can be referred to Lok Adalat. There is no court fee and rigid procedure followed, which
makes the process fast. If any matter pending in court, referred to the Lok Adalat and is settled
subsequently, the court fee originally paid in the court when the petition filed is also refunded back
to the parties.

Parties are in direct interaction with the judge, which is not possible in regular courts. It depends on
the parties if both the parties agree on case long pending in regular court can be transferred to Lok
Adalat. The persons deciding the cases have the role of statutory conciliators only, they can only
persuade the parties to come to a conclusion for settling the dispute outside the regular court in the
Lok Adalat. Legal Services Authorities (State or District) as the case may be on receipt of an
application from one of the parties at a prelitigation stage may refer such matter to the Lok Adalat
for which notice would then be issued to the other party. Lok Adalats do not have any jurisdiction to
deal with cases of non compoundable offences.