APPLICATION OF ADR IN VARIOUS SECTORS

ARBITRATION: -

APPLICATION OF ARBITRATION IN CORPORATE SECTOR: -

 Arbitration is a leading method for resolving disputes arising from commercial

agreements and other domestic and international relationships. The practice of
arbitration has developed so as to allow parties from different legal and cultural
backgrounds to resolve their domestic and / or cross border disputes, generally away
from litigation.

 Majority of the companies in India have a dispute resolution policy.

 Arbitration remains a preferred dispute resolution mechanism, despite certain

loopholes and shortcomings in the arbitration environment in India

 Institutional arbitration is yet to be widely used by companies in India.

 Retired Supreme Court / High Court judges are a preferred choice for arbitrators.

 Companies in India are yet to fully appreciate the tactical significance of the seat of
arbitration.

 More companies are using expert evidence in arbitration proceedings.

 The future of arbitration in India is optimistic.

Popularity of Arbitration Institutions

Singapore International Arbitration Centre (SIAC) and Industrial Arbitration Court (IAC),
Singapore, International Chamber of Commerce (ICC) and London Court of International
Arbitration (LCIA), UK were widely opted to administer and resolve disputes.

While choosing an institution, following reasons have importance;

 Which of these arbitral institutions, if any has administered your company’s

arbitrations in the past?
 been rated most significant by companies having experience of institutional
arbitration: • Overall cost and fees,
• Reputation, and
• Neutrality and independence of the institution.

While companies generally indicate a flexible approach towards negotiating arbitration

clauses, they indicated that the seat of arbitration (among other factors such as law governing
the arbitration and language followed in the proceedings) would primarily drive the
negotiation.

In international commercial arbitration, it is of foremost importance that parties to a dispute

agree on the seat of arbitration. Choosing a seat of arbitration is crucial for many reasons.

• It plays a unique role in deciding the law governing the arbitration procedure.

• It determines the support or intervention that may be received from local courts in the
course of arbitration.

• It also has a bearing on the process and rights relating to enforcement of the arbitration
award.

Consequently, when drafting an arbitration clause in a new contract, it is important to

consider myriad factors when deciding upon the seat, particularly, how the local arbitration
law of the seat operates and whether the local courts are arbitration-friendly.
APPOINTMENT OF ARBITRATORS: -

Companies give regard to various factors they take into consideration in appointing
arbitrators. Generally, the companies in India primarily look for arbitrators with an
established reputation in the arbitration community along with relevant industry and/or
regional expertise.

In case of arbitration seated in India, companies with prior arbitration experience prefer to
appoint [in the descending order of priority]:

• Retired Supreme Court / High Court judges

• Senior counsel

• External experts

• Solicitors / law firm partners and

• Others (e.g. District Court judges)

Where the seat of arbitration is outside India, companies prefer [in the descending order of
priority]:

• External experts

• Solicitors / law firm partners

• Senior counsel and

• District Court judges and/or recommendation from tribunal or group counsel.

 It has already been established that an overwhelming majority of corporations in India

are opting for arbitration closely followed by litigation. However, the dissatisfaction
associated with resolving disputes when seat of arbitration is in India cannot be
ignored.

 In India, change is contemplated, and the Law Ministry has proposed its
recommendations to amend the legislation. Domestic or international arbitration will
be a sought after option for companies in India with such positive steps taken by the
industry and the Government together.
 A qualitative analysis of the challenges faced by companies and their learning from
the arbitration process suggests following two critical points that will contribute in
shaping the future of arbitration in India.
a. Need for a robust institutional arbitration infrastructure to overcome a significant
challenge relating to selection and availability of arbitrators and subsequent time and
cost of the proceedings; and
b. Realising the tactical benefits of seat of arbitration.

NEGOTIATION: -
SCOPE

o The process of negotiation started a long time back during the times the kings
negotiated at the time of an ongoing war or to prevent the happening of war.

o We are even aware of the negotiation rounds after the two great world wars in the
20th century which ultimately resulted in the creation of the League of Nations and the
United Nations respectively.

o Over time negotiation has increased its scope. The reason is mainly that the parties
wish to settle their disputes out of court.

o There are several disadvantages of the litigation process which include bulky
paperwork, excessive time and delays in the process of settlement.

o With the increase in the fame of negotiation, the demand for experienced negotiators
has increased. There are several cases in which negotiation is applicable.

1. MARITAL DEADLOCK
 In the pre-litigation process of a marital issue, negotiation is predominant. The ego
and sentiments between the husband and the wife in a conjugal relationship are often
settled by communication during the negotiation process. A couple already divorced
is also advised to negotiate as to the terms of alimony and the custody of the child.

2. BUSINESS NEGOTIATION

 Business negotiation is a key skill to manage the business and corporate matters. The
skills required in negotiation include making deals, discussing on the profits of the
company, building a team, negotiating with the employees and the labourers,
negotiating for contracts, handling cases of dispute between clients, employee
compensation cases, mergers and acquisitions, fixing the prices of various consumer
goods, negotiation on auction prices, real estate prices and so on.
 For settling a business agreement, the art of negotiation is essential. Business
negotiation is the skill where the big problem is broken down into smaller chunks and
then the solution to every problem is carefully found out.

3. CONTRACT BASED NEGOTIATIONS

 The contract-based negotiation is the most famous type of negotiation where the
parties to a dispute negotiate the terms and the conditions of the contract before
entering into contractual relationships with each other. The contract-based
negotiations are somewhat in line with the business negotiations. The deadlock after
the breach of the contractual requirements is also sometimes settled with the help of
negotiations.

4. ADMINISTRATIVE NEGOTIATIONS

 The negotiations between different organizations with each other on important

decisions are also in the form of negotiations. The various negotiations in the dispute
between states, organizations, the agencies of the government, the military
negotiations, the legislative negotiation, etc. Wherever, there is a decision of utmost
importance that ought to be taken up, a round of negotiations with the stakeholders is
of vital importance.
5. INTERNATIONAL NEGOTIATIONS

o International negotiation is the process of dialogue of the parties in power with the
objective to achieve certain common goals or to dissolve an impasse. International
negotiations can also be a medium to improve international relations, strike a deal or
to make an agreement on a topic of law. However, records international negotiations
have not always shown to be successful in completely solving the issue at hand and
clearing the strained relationship.

o The types of international negotiations are varied from the public to private, bilateral
to multilateral. The subjects of the negotiation are not always stating and can also
involve non-state actors such as the origination of UN, UNICEF, etc and other
terrorist originations thus increasing the scope of negotiations in the field of
international relations. Researchers claim the fact that the style and the manner in
which international negotiations are dealt with is place-specific where the number of
factors influences the negotiations such as the customs, the language, the conduct and
the style of speaking.

o The major aim of international negotiation as stated above is to allow smooth

interconnectivity and inter-relativity between nations in a way that is beneficial for
both the countries in the economical as well as the other spheres. The conflict
between nations can easily turn into scandals that need to be resolved. International
negotiation generally takes a longer time than that of the other negotiation processes.
The process is complicated and involves many steps and bureaucrats are involved in
the process.

 There are various types of negotiations such as bilateral and multilateral negotiations
regarding the strength of the parties to a dispute. The bilateral negotiation consists of
2 parties whereas the multi-lateral negotiations have many parties involved in the
process of negotiations.
 MEDIATION
INSOLVENCY & MEDIATION: -

 Mediation not only democratises insolvency resolution processes, but creates an

inclusive space that benefits all parties

 The Supreme Court exercised its special powers under Article 142 of the Constitution
of India to appreciate and/or enhance the efforts towards the Settlement of the
Disputes, in two cases involving the settlement of claims between creditors and debtor
companies. Article 142 gives powers to the SC to pass such orders as are necessary
for doing complete justice in any case pending before it.
 The need for the SC to draw on its constitutional powers to sanction a settlement
between a creditor and the debtor company arose from two factors.

 The first is the collective nature of the insolvency resolution process. The process
looks to settle debts of all the creditors through an insolvency resolution plan. As
such, regulations under the Code do not allow closure of the case on the settlement of
the creditor.
 Secondly, in a bid to streamline the process, the regulations do not permit non-
financial creditors to settle their dues with the debtor company. Participation and
approval to the insolvency resolution plan is limited to the financial creditors. The
only standard for protecting the non-financial or operating creditors, which group
includes the workers and employees of the company, is that the repayment to the
operational creditors under the resolution plan should not be less than the amount they
would have received were the company to proceed to liquidation.

 Despite the stiflingly linear process of insolvency resolution under the Code, it is
possible to create spaces for participation of these stakeholders. Collective settlement
of multiple claims of the creditors on the debtor company can be attempted through
multi-party negotiations through mediation. Indeed, it is important that this space for
insolvency resolution be inclusive.
 Mediation has been used in several jurisdictions for insolvency resolution and has
some specific advantages. Creditors of a corporate debtor in an insolvency resolution
process know the smallest amount of repayment they are willing to receive, and the
necessity of conceding to the needs of the debtor. With this beginning, mediated
discussions for settlement with creditors can help put together a resolution plan that is
arrived at through finding out and understanding the interests and needs of
stakeholders.
 Mediation allows for parsing the broad classifications of financial and operational
creditors. There are several enactments that safeguard interests of special
constituencies — e.g. housing allottees under the Real Estate Act, 2016; workers and
employees under the Employees Provident Fund and Miscellaneous Provisions, Act,
1952, start-ups, micro and small industries under the MSME Act, 2006.
 These laws provide, for instance, for the ring-fencing of payments by housing
allottees, priority in repayment to workers, special dispute resolution processes and
statutory interest payments to start-ups and micro and small industries. The formal
process of insolvency resolution disregards these special interests.
 Mediation, on the other hand, creates the space to acknowledge and provide
differently for these needs. As an example, the same impairment of the debts owed to
a start-up, and those owed to a larger and well-established vendor of the debtor
company, has differing impacts, and this can be acknowledged and addressed.
 Other advantages accrue in utilising mediation. Insolvency resolution plans are
contingent on a continued relationship with creditors. Operational creditors of the
corporate debtor, such as trade creditors and workers have no formal participation or
decision-making powers in the resolution plan under the regulations.
 The only agency to these creditors in this process is to discontinue their business or
services to the corporate debtor if there is dissatisfaction with the resolution plan
imposed on them. Through discussions facilitated by mediation, and in formulating a
plan that accounts for their views and needs, these relationships can be preserved and
continued. For new investors, this is an opportunity to build relationships with these
stakeholders.
 The other limb in the insolvency resolution process is the receipts from debtors of the
company. This is important in the ultimate resolution plan, and is another area where
mediation can be usefully adopted. Mediation can be used in negotiating settlements
on repayment of the dues owed to the company which align with its rehabilitation.
 This is speedier and less costly. Mediated settlements are also more effective in terms
of compliance, since the resolution is consensual.
 Mediation has several advantages over bilateral settlement negotiations. First,
mediation involves a trained neutral, who takes the responsibility of structuring and
facilitating discussions. In a typical negotiation, parties are reluctant to share
information and their interests, for fear of being exploited, and limit discussions to
their demands and expectations on how an issue should be resolved.
 This obstacle to effective discussions is overcome by a mediator, who through the
confidentiality built into the process, encourages conversations around needs and
interests of the stakeholders and the investor, and the articulation of various options
through which these interests could be met. The mediation process also takes
advantage of dissimilar interests and varying needs amongst groups of creditors to
fashion a settlement that treats such groups differently but does not impact their
interests.
 The laws for insolvency resolution in Japan and the US, as examples, incorporate
alternative dispute resolution processes. Mediation is used at the instance of a party or
on the directions of the bankruptcy judge in Chapter XI bankruptcy resolution
processes in the US. Japan has adopted a special conciliation law for bankruptcy
resolution.
 Settlement of contracts under which Lehman entities were due money, and debts to
investors in Lehman Brothers’ linked investments were effectively undertaken
through mediation.
 In India, the 2013 Companies Act already makes provision for resolution of disputes
through mediation. The Companies (Mediation and Conciliation) Rules, 2016,
facilitates mediation in disputes before the NCLT.
 The Code gives extensive powers to the committee of creditors in the insolvency
resolution process, including to veto insolvency resolution plans. Mediation should
therefore be under the initiative of the committee of creditors and the insolvency
resolution professional.
 Mediation can be a time bound process, which fits into the strict timelines for
insolvency resolution under the Code. Its specific advantage in the insolvency
resolution process lies in its democratising the insolvency resolution process, and in
its acknowledgement that it is in the common interests of all the stakeholders to work
together to rehabilitate the company.
 CONCILIATION
CONCILIATION A PRACTICAL APPROACH - IN DELHI & OTHER STATES: -

Conciliation as a mode of dispute resolution is frequently resorted to at the pre litigation stage
in Delhi. Various public sector disputes to conciliation. Such conciliation clauses provide for
settlement of disputes through conciliation prior to taking recourse to judicial or arbitral
proceedings. The parties may have their own conciliators and conduct conciliation in
accordance with Part III of the Arbitration and Conciliation Act, 1996 or avail the services of
any institution providing facilities for resolution of disputes through conciliation. There are
various such institutions in Delhi offering institutional conciliation as a mode of dispute
resolution.

The International Centre of Alternative Dispute Resolution provides institutionalized

conciliation services in Delhi for resolution of disputes. The ICADR has also framed ICADR
Conciliation Rules, 1996 dealing with appointment of conciliators, commencement and
conduct of conciliation proceedings, etc.

The matter can be referred to conciliation by ICADR by virtue of an agreement providing for
the reference of a dispute to conciliation by ICADR. On some occasions, even where the
matter is not referred to institutional conciliation to ICADR, the conciliators on ICADR’s
panel are engaged by various government departments and PSUs for conduct of ad hoc
conciliation. The ICADR has its own fixed schedule of conciliator’s fee and administrative
fees chargeable on the basis of the amount in dispute. ICADR also charges fees for
appointment of conciliator and fees for providing infrastructure/ facilities separate on a daily
basis. The fees charged ICADR in conciliation matters is the major factor which results in
lower number of references to institutional conciliation. Nonetheless ICADR provides
facilities of institutionalized conciliation in Delhi & other States, which are being utilized by
the disputant parties, though only to a limited extent.
The Indian Council of Arbitration (ICA) also provides facilities for resolution of disputes by
institutional conciliation in Delhi & other States. The ICA has framed rules known as the
Rules of Conciliation of the Indian Council of Arbitration dealing with appointment of
conciliators, commencement and conduct of conciliation proceedings, confidentiality etc. The
ICA maintains a list/ panel of professional conciliators for facilitating conciliation between
parties.

The ICA also charges fixed fee as per Rules 26 and 27 and the schedule of fees of the Rules
of Conciliation of ICA on the basis of the claim amount. The ICA has been providing quality
conciliation services which are being frequently utilized by the disputant parties.

PRE LITIGATION AD HOC CONCILIATION IN DELHI & OTHER STATES

 Ad hoc conciliation at the pre litigation stage is an extremely beneficial ADR

mechanism. It is better than mediation since a conciliation settlement agreement is
executable in a summary manner as a decree of the court in contradistinction to a
mediation settlement agreement. However, it is used only to a limited extent.
 The corporates usually prefer institutional conciliation, though in some cases private
companies and PSUs go in for conciliation conducted by ad hoc conciliators
appointed by the parties by mutual accord.
 However, in case of individual disputants it seldom happens that such individuals are
not aware of the existence and utilities of the process of conciliation and hence
statutory conciliation remains unexplored.
 However, it can be expected that with increase in awareness conciliation may gain
momentum as a resolution process especially at the pre litigation stage.

NEED FOR STATE SPONSORED CONCILIATION: -

 In the United States of America numerous commercial disputes do not enter the courts
because they are resolved at the pre litigation stage. The ever-surmounting arrears
pose a perplexing problem before the judicial system in India and one of the
 conceivable strategies to counter this situation is to somehow put a check on the
number of lawsuits instituted.

 In Delhi & other States of India also pre litigation conciliation is the need of the hour
and the statutory provisions are also well in place for pre litigation conciliation. A
standardized or institutionalized, state sponsored/ court annexed, pre litigation
conciliation mechanism appears to be a viable solution in this direction, which if
established, would definitely result in better implementation of ADR in India.

 The reasons for the need of such a mechanism are similar and need not be reiterated
In the year 1984, the Himachal Pradesh High Court, under the leadership of then
Chief Justice P.D. Desai, had evolved a project for disposal of pending cases by
conciliation, insisting on pre-trial conciliation in fresh cases and this model was
widely acclaimed.

 However, it is matter of dismay that the legislature has not stepped in so as to accord
statutory recognition to any such state sponsored pre litigation conciliation
mechanism.

 The advantages of conciliation have already been expounded and need not be
reiterated. Therefore, such a pre litigation dispute resolution mechanism employing
conciliation as the process of dispute resolution would undoubtedly give prolific
results and would radically decrease the burden on the courts.

 From a practical point of view pre litigation conciliation is therefore of greatest

importance. One thing is aptly clear that such a state sponsored/court annexed pre
litigation conciliation mechanism, if established would go a long way in keeping a
check on judicial arrears as well as offering an efficacious mode of ADR at the pre
litigation stage itself.

CONCLUSION: -

 Conciliation is an ADR mechanism where the ADR neutral known as the conciliator
steers the disputant parties towards a negotiated settlement. Conciliation has a well-
 entrenched statutory framework In India and is governed by the provisions of part III
of the Arbitration and Conciliation Act, 1996.

 Conciliation is strikingly similar to mediation as both the processes can fundamentally

be described as facilitated negotiations and in fact at times the two terms are used
synonymously in various jurisdictions.

 In India however the introduction of the two terms separately in section 89 CPC has
necessitated the development of a fine line of distinction between mediation and
conciliation.

 The conciliator in the process of conciliation as is understood in India plays an

evaluative and interventionist role and is statutorily authorized to make suggestions
and propose plausible solutions to the parties while mediation is regarded as an ADR
process which is primarily facilitative.

 The principal advantage in conciliation is that a conciliation settlement agreement is

treated to be an arbitral award on agreed terms and is executable as a decree of the
court under the Arbitration and Conciliation Act, 1996.

 It is primarily because of this advantage that conciliation overshadows mediation as

an ADR mechanism at the pre-litigation stage in Delhi & other States of India. There
are various institutions principally operating in Delhi such as ICA, FACT, ICADR,
etc. which provides state of the art infrastructure, professional conciliators and
excellent facilities for conciliation.

 There are various companies and PSUs which incorporate conciliation clauses in their
contracts and go in for conciliation at the pre litigation stage, conducted either by ad
hoc conciliators appointed by the parties by mutual accord or by institutions providing
conciliation services.

 However, the situation is diametrically opposite when it comes to post litigation

conciliation. Though conciliation is resorted to under the Hindu Marriage Act, 1955
and the Family Courts Act, 1984 for resolution of matrimonial disputes by the courts
themselves, however in general, the process of mediation overshadows conciliation as
 a dispute resolution process under section 89 CPC and in fact conciliation has been
rendered redundant.

 One of the reasons is that the process as it has been interpreted today requires the
consent of both the parties for being referred to conciliation in a sub-judice matter by
the court. Secondly, after such reference is made to an external conciliator, the matter
moves out of the realm of the courthouse requiring the parties to incur extra
expenditure on such out of court conciliation.

 The prime reason is, however, the judiciary’s choice of mediation over conciliation.

 ‘Samadhan’ primarily established and operating at the Delhi High Court is the Delhi
High Court’s Mediation and Conciliation Centre.

 The rules framed by the Delhi High Court are described as the Mediation and
Conciliation Rules, 2004. Despite this conciliation is rarely resorted to at
‘Samadhan’. At the district courts the same Mediation and Conciliation Rules,
2004 are applicable yet there are no facilities for conciliation and here in fact
the centres have been designated as Mediation Centres only with no reference
to conciliation.

 The Mediation and Conciliation Rules, 2004 contemplate that conciliation

should also be offered as a dispute resolution process to the parties.

 The process of mediation has therefore been given wide publicity and
recognition in Delhi as a court sponsored mode of dispute resolution and since
both conciliation and mediation are generically similar, the process of
mediation is extensively used at the post litigation stage and flourishes in
Delhi whereas conciliation remains practically unexplored in this arena
although conciliation offers similar advantages and much more at the pre
litigation stage.

 Conciliation, however, is an excellent ADR mechanism and offers distinct advantages

such as a well-entrenched statutory framework, flexibility of procedure, a more
 interventionist role for the conciliator, a settlement which is executable as a decree of
the court and statutory guarantee of confidentiality.

 In fact, the more interventionist role of the conciliator would prove to be an added
advantage in parties who belong to the poor strata or are not aware of their rights and
liabilities. There is absolutely no reason as to why the conciliation cannot be utilized
as an effective ADR mechanism simultaneously with mediation.

 The other States of India should endeavour to provide a state sponsored, state funded,
court annexed conciliation mechanism like mediation at the mediation and
conciliation centres attached to the courts in Delhi and give adequate publicity and
importance to conciliation as an ADR mechanism at the post litigation stage.

 At the pre litigation stage also conciliation can be utilized at a mode of dispute
resolution if the mediation and conciliation centres diversify and expand their role to
offer pre litigation services.

 In fact, it can be of great use specifically for the ADR centres mooted by the Delhi
Dispute Resolution Society. Conciliation has therefore great potential in Delhi as an
ADR mechanism, however, it is not being utilized in Delhi to its full potential.

 Therefore, there is an urgent need to appreciate the utility of this ADR process and
take necessary measures for advocating, propagating, popularizing and utilizing
conciliation as an ADR process in Delhi & same should be encouraged and
established in various other states of India as well.