Resolving disputes through traditional courts can be a daunting process — expensive, time-consuming, and stressful. Judicial Dispute Resolution (JDR) often drags on for years, exhausting resources and patience.
As of November 15, 2024, India’s district and subordinate courts face a staggering 4.53 crore pending cases!
But did you know there are alternative ways to resolve disputes quickly, privately, and amicably? This is where Alternative Dispute Resolution (ADR) steps in.
What is ADR?
ADR refers to methods of settling disputes without resorting to litigation. It encompasses various approaches, including Mediation, Conciliation, Negotiation, Lok Adalat, and Arbitration. These methods offer faster, more flexible, and cost-effective alternatives to conventional courtroom battles.
“In JDR, clients depend heavily on advocates due to the formalities involved in litigation. But in ADR, like mediation, the processes are simple and it almost resembles a panchayat system, where both the parties have the liberty to talk freely and solve their disputes without any hostility,” A G Abhishek, a lawyer handling Supreme Court Special Leave Petition (SLP) cases, explains.
ADR offers numerous benefits, including confidentiality, faster resolutions, and tailored processes. It also helps preserve relationships, often strained in court battles. ADR is especially effective in business, employment, family, and consumer disputes.
Arbitration: A closer look
Arbitration is a formalised ADR method where an independent arbitrator hears both sides and makes a decision, which is typically binding for both parties. Think of the arbitrator as a private judge who ensures a fair and impartial resolution without involving the formal court system.
This method works well for commercial, contractual, financial, intellectual property, and even international disputes.
Abhishek notes, “Arbitration benefits courts by addressing less critical issues outside the courtroom, saving judicial time for more pressing cases. Consumers also gain quick and quality resolutions.”
These advantages have prompted legislative reforms aimed at making arbitration more accessible and efficient in India. The Arbitration and Conciliation (Amendment) Act, 2019 seeks to transform the country into a more arbitration-friendly jurisdiction. By reducing court involvement and aligning Indian arbitration laws with international standards, the Act aims to create a more efficient and predictable legal framework for resolving disputes.
Key characteristics of arbitration:
1. Voluntary agreement: Arbitration typically stems from mutual consent, outlined in contracts that bind parties to settle disputes through arbitration.
2. Neutral arbitrator: A third party — often an expert in the dispute’s subject matter — acts as an impartial decision-maker.
3. Private and confidential: Unlike court proceedings, arbitration is confidential and takes place in an arbitration centre which protects sensitive information and preserves business reputations.
4. Binding decisions: The arbitrator’s decision, called an award, is usually final and enforceable, with limited grounds for appeal. This ensures a conclusive resolution.
5. Flexibility: Parties can tailor the process, including selecting arbitrators, and setting rules and timelines, making it faster and more adaptable than litigation.
6. Cost-effective: Arbitration often reduces the costs associated with prolonged court battles, as the process is streamlined with fewer procedural delays.
7. International applicability: Arbitration is widely recognised across borders through treaties like the New York Convention, making it ideal for resolving international disputes.
Who can solve disputes via arbitration?
Anybody who has mentioned in the agreement clause that their disputes will be solved via arbitration can approach the arbitration centres. The agreement must be submitted as proof for further proceedings.
“If the parties have not included an arbitration clause in their agreement, they can submit an application to the court under Section 11 of the Arbitration and Conciliation Act (1996), requesting to fix an arbitration. Based on the technicalities of the issue, a retired judge or anyone with equal expertise will be appointed as the arbitrator for the dispute,” says Abhishek.
Arbitration centres, often established under High Courts, facilitate this process. Prominent examples include the Mumbai Centre for International Arbitration (MCIA), Delhi International Arbitration Centre (DIAC), and Chennai Arbitration Centre.
Notable cases:
- Amazon vs Future Retail (2020-2023)
Amazon and Future Group clashed over a $3.4 billion deal for Reliance to acquire Future Retail’s assets, which Amazon claimed violated its prior agreement granting rights over Future Group’s retail assets.
An Emergency Arbitrator (EA), with both parties’ consent, barred FRL from transferring its assets on October 25, 2020. FRL challenged this in the Delhi High Court, where a Single Judge upheld the EA’s order, but the Division Bench later deemed it unenforceable. Ultimately, the Supreme Court upheld the EA’s order under the Arbitration Act.
- Vodafone vs Indian Government (2020)
Vodafone initiated arbitration against the Indian government over a ₹22,000 crore retrospective tax demand introduced by a 2012 amendment to tax laws.
The case, heard at the Permanent Court of Arbitration in The Hague, concluded in Vodafone’s favour, ruling that the tax demand violated the bilateral investment treaty between India and the Netherlands. India was directed to refund legal costs and abandon its claim for retrospective taxes.
“Consumers are often unaware of ADR measures due to the misconception that ADR is time-consuming and may not yield optimal results. However, this is not entirely accurate. Better awareness is needed to highlight the benefits of these measures for consumers,” notes Abhishek.
Why choose arbitration?
As India’s legal landscape evolves, ADR mechanisms, particularly arbitration, are gaining traction. With laws like the Arbitration and Conciliation Act simplifying the process, arbitration is now more accessible to individuals and businesses alike.
Abhishek adds, “Mediation, Arbitration, and Lok Adalat form the pillar of reducing court burden.” Arbitration offers a balanced approach, saving time, preserving relationships, and maintaining privacy. It’s the future of dispute resolution in India.
Edited by Khushi Arora
