MOD III- LEGISLATIVE FRAMEWORK AND RECENT DEVELOPMENTS

• Statutory forms of ADR

• Arbitration
• Conciliation
• Lok Adalat
• Non statutory forms of ADR
• Negotiation
• Mediation

Lok Adalat
• People’s Court
Types of cases dealt with at Lok Adalat:
1. Mutation of land cases.
2. Compoundable criminal offences.
3. Family disputes.
4. Encroachment on forest lands.
5. Land acquisition disputes.
6. Motor accident claim, and
7. Cases which are not sub-judice.
Settlements are not always necessarily according to legal principles.
• Settlements have an eye mainly on-
 Social goals like ending quarrels
 Restoring family peace
 Providing succor for destitute.
 The Legal Services Authority Act, 1987
 Section 19. Organization of Lok Adalats
 Section 20. Cognizance of cases by Lok Adalats.
 Section 21. Award of Lok Adalat.
 Section 22. Powers of Lok Adalat or Permanent Lok Adalat

The Industrial Disputes Act, 1947.

  Conciliation has been accepted by law as an effective method for resolving disputes in
relation to disputes between employees and management.
 The Industrial Dispute Act, 1947 calls for conciliation as well as arbitration for dispute
settlement purposes.
 Features of the Act
 The main purpose of the Industrial Dispute Act is to examine and settle industrial
disputes.
 For this, various bodies have been formed by the Act like the works committee,
conciliation Officer, Board of Conciliation and Courts of Inquiry.
 These bodies try to resolve the conflict before it can be resolved by the Labor Court or
the Industrial Tribunal.
 The main goal is to settle the labor dispute in a friendly manner.
 Rajasthan State Road Transport Corporation V. Krishna Kant
 The Supreme Court held that “the policy of law emerging from Industrial Disputes
Act, and its sister enactments is to provide an alternative dispute resolution
mechanism to the workmen, a mechanism, which is speedy, inexpensive, informal
and unencumbered by the plethora of procedural Laws and appeals and revisions
applicable to civil courts.”

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Procedure (Act 5 of 1908) repealed the Act of 1882.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.

• In 2002, Indian Parliament brought an amendment to Section 89 of the Civil Procedure Code,
1908.

• The amendment brought in a different alternative dispute resolution mechanism in Section

89.

• The Bar at Salem was not satisfied by this and other amendments.

• In Salem Advocate Bar Assn.(I) v. Union of India, the constitutionality of Section 89 was

challenged.

• The Court upheld the constitutionality of Section 89.

• The Court also observed that the availability of such provisions in foreign countries have
been very successful.

• The judgment of the Supreme Court in Afcons has been considered by the Law Commission
of India and the Law Commission has also opined that Section 89 which provides for
settlement of disputes outside the court is inappropriately worded and the language adopted
has created difficulty in giving effect to the provision and therefore Section 89 should be
recast

• The Court constituted a committee under the chairmanship of Justice M. Jagannadha

Rao (Retired) to review the difficulty in workings of the amendments.

• As per the Committee’s recommendation, the Supreme Court ordered all the High Courts to
formulate their own rules for ADR and mediation.

• The recommendations of the Committee were accepted by the Court in another judgment.
 The Arbitration Act Of 1940:
 The Arbitration Act, 1940, dealt with only domestic arbitration. Under the 1940 Act,
intervention of the court was required in all the three stages of arbitration in the tribunal, i.e.
prior to the reference of the dispute, in the duration of the proceedings, and after the award was
passed.
This Act made provision for- a) arbitration without court intervention; b) arbitration in suits i.e.
arbitration with court intervention in pending suits and c) arbitration with court intervention, in
cases where no suit was pending before the court.
Before an arbitral tribunal took cognizance of a dispute, court intervention was required to set the
arbitration proceedings in motion. The existence of an agreement and of a dispute was required
to be proved. During the course of the proceedings, the intervention of the court was necessary
for the extension of time for making an award.

Finally, before the award could be enforced, it was required to be made the rule of the court. This
Act did not fulfill the essential functions of ADR. The extent of Judicial Interference under the
Act defeated its very purpose. It did not provide a speedy, effective and transparent mechanism
to address disputes arising out of foreign trade and investment transactions. 

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.
This Act repealed all the three previous statutes. Its primary purpose was to encourage arbitration
as a cost-effective and quick mechanism for the settlement of commercial disputes. It covers
both domestic arbitration and international commercial arbitration. It marked an epoch in the
struggle to find an alternative to the traditional adversarial system of litigation in India.
The changes brought about by the 1996 Act were so drastic that the entire case law built up over
the previous fifty-six years on arbitration was rendered superfluous. Unfortunately, there was no
widespread debate and understanding of the changes before such an important legislative change
was enacted. The Government of India enacted the 1996 Act by an ordinance, and then extended
its life by another ordinance, before Parliament eventually passed it without reference to
Parliamentary Committee.

Arbitration, as practiced in India, instead of shortening the lifespan of the dispute resolution,
became one more “inning” in the game. Not only that, the arbitrator and the parties’ lawyers
treated arbitration as “extra time” or overtime work to be done after attending to court matters.
The result was that the normal session of an arbitration hearing was always for a short duration.
Absence of a full-fledged Arbitration Bar effectively prevented arbitrations being heard
continuously on day-to-day basis over the normal working hours, viz. 4-5 hours every day. This
resulted in elongation of the period for disposal.

Veerappa Moily also said in the ADR congress held in the year 2010 that the 1996 Act, although
modeled along international standards, has so far proved to be insufficient in meeting the needs
of the business community, for the speedy and impartial resolution of disputes in India.[15]
The Law Commission of India prepared a report on the experience of the 1996 Act and
suggested a number of amendments. Based on the recommendations of the Commission, the
Government of India introduced the Arbitration and Conciliation (Amendment) Bill, 2003, in the
Parliament. The standing committee of law ministry felt that provisions of the Bill gave room for
excessive intervention by the courts in arbitration proceedings.

RECENT DEVELOPMENTS
• Mediation in India is governed by the Mediation Rules of 2003.

• The Law Commission of India suggested establishment of commercial courts, first, in the
form of creating division in the High Court itself or establishing separate commercial courts.

• The second suggestion resulted in the passage of the Commercial Courts Act, 2015.

In 2018, the present-day Government, in alignment of its policy of improving the ease of doing
business, came up with an amendment to the Commercial Courts Act, 2015

• The President, in May 2018, promulgated an Ordinance which amended the Commercial
Courts Act, 2015.

• As per this amendment, the Government introduced pre-litigation mediation for all the
commercial disputes.

• The provision concerned is Section 12-A(1) which states that in cases where no interim relief
is required, the matter would be referred to compulsory mediation.

Section 12-A(2) empowers the Central Government, through notification, to authorise the
authorities under the Legal Services Authorities Act, 1987 for pre-institution  mediation.[

Impact of COVID-19 on the alternative dispute resolution 

In the present circumstances where the spread of Coronavirus (COVID-19) has put everything on
hold, it is important to address its impact on ADR.
COVID-19 has caused havoc on the global economy and corporate relationships, causing
unprecedented disruptions. A large number of commercial conflicts are arising as parties struggle
to fulfil their contractual obligations. Hence there is a great possibility that the crisis will increase
litigation, delaying the resolution of pending court cases, which will consequently result in more
burden over the judiciary, and this way the parties can steer towards ADR for a speedy resolution
to the disputes raised. Hence because of this pandemic,  virtual hearing in ADR has come into
existence. 

Virtual ADR

 The virtual ADR provides a hassle-free resolution to the parties and it doesn’t require
any party or attorney to travel from one place to another.
 Both parties can communicate with each other through video conferencing, which
allows them both to hear and see each other. 
 In the case of mediation, the mediator can easily communicate with parties separately
using an easy method and can come to an agreeable settlement. 
 Just like any new initiative faces so many challenges, virtual ADR will also face some
troubleshooting in starting. But it is certainly a step in a great and right direction. 
 ADR is now not an alternative platform for dispute resolution but it has become the
first way to resolve disputes in a speedy, fast, and cost-effective way. 
However, it should be noted that as ADR is hassle-free and one of the money and time-saving
mechanisms it also possesses some obstacles before it. It is not a big secret that lawyers have
always been contrary to technology. However, in times like these, it is the need of the hour to
learn and adopt technology but it’s sort of critical for some people as well as lawyers. It needs
rigorous and continuous training for lawyers to transit from offline to online mode. It is one of
the hard tasks to provide an internet connection to all the courts of India and some of the courts
also have poor network issues. Adequate security protocols must be implemented to ensure that
sensitive data is not compromised or tampered with in any way.

Amendment of 2021

One of the recent amendments in the Arbitration and Conciliation Act, 1996 is Arbitration and
Conciliation (Amendment) Act 2021. This is the third time the Act of 1996 has been amended in
the last six years, indicating the legislative intent to amend the Act of 1996 and make India a
more arbitration-friendly country. The said amendment has made two major changes in the Act
and those are: 
  The first is to allow automatic stay on awards in some cases where the court has prima
facie evidence that the contract on which the award is based was tainted by “fraud”
and “corruption.”

 The other major change in the Act of 1996 is the omission of the 8th schedule from
the main Act. It specifies the qualifications, experience, regulations, and norms that
should be followed for accurate mediation of arbitrators. 

2021 Amendment’s effects on India’s arbitration 

The impact of the automatic stay on awards 

The amendment made in Section 34 of the main Act is the most substantial change done to the
provision of Arbitration Awards in the Amendment Act of 2021. In the main statute in Section
34, it has been stated that a party can file an application before the court for setting the
arbitration award aside. Hence, after the Amendment Act of 2015, it has been stated that an
automatic stay would not be granted on the operation of awards only after mere filing of an
application for setting aside the award. Now the Amendment of 2021 has introduced a material
change by adding a provision under Section 36(3) so that the court can be assured that if the
prima facie evidence shows that the case is based on either the arbitration contract or the
agreement that forms the basis of the award, or that the award was formed or has been affected
by fraud or corruption. It should have to stay the award completely pending the disposal of the
challenge. It has a retrospective effect which will be deemed to effectuate from October 23 of
2015. 

In Parliament, the complete or unconditional stay has been criticized so many times during the
introduction of the Bill in the Lok Sabha. Various experts have pointed out that this
unconditional stay on awards is like a blanket stay that will plunge the efforts of India towards
the pro-arbitration regime. Primarily this was said because the party will easily lose to alleged
corruption and the automatic stay in the enforcement of arbitral awards. 
It has been also said that this will defeat the main purpose of alternate dispute mechanisms by
bringing parties to the courts and by making this prone to litigation. The other important concern
with this amendment is that the legislation does not define either corruption or fraud. It will
automatically create an ambiguous situation where the defendant party may suffer the rigid
procedure of litigation even if the party is right and it will also open the gate of courts for a high
wave of litigations by overburdening the court system. 

Expanding the scope of qualification of the arbitrators

This area includes two amendments, including the Amendment of 2019 which is interlinked with
the amendment of 2021. The amendment made in the original or main Act that added Section
43(j), stated the qualification, eligibility, and norms for accreditation. The said section further
directed the 8th schedule of the Act, which provided an exhaustive list of qualifications for the
persons who want to possess the position of arbitrator. The schedule included the minimum
requirements of a person having the educational qualification at degree level including 10 years
experience in technical or scientific stream. After the professional level qualification, the said
schedule also provided the general norms which would apply to an arbitrator for reaching
accreditation such as integrity, fairness, being impartial, neutral, etc. 
These qualifications and the general norms were broad that this section among the other things
limited the qualified foreign lawyer’s ability from acting as an arbitrator within India. It seemed
like a significant hurdle as compared to arbitration-friendly regions such as France etc. 
The 2021 Amendment has given substitution to Section 43(j) of the Act and also deleted the 8th
schedule from the main Act. It stated that the parties can appoint the arbitrator regardless of their
qualifications. The Lok Sabha appreciated the Bill by stating that it will attract eminent
arbitrators from foreign countries and will also add to making India a global hub of International
Arbitration. 

Emergency arbitration

The concept of emergency arbitration provides emergency arbitrators who can be utilized when
urgent relief is needed and during the period of the pandemic, people used this provision. There
has been uncertainty in India regarding the enforceability of the emergency awards and the
orders for arbitrations that have taken place in India. The LCI (Law Commission of India) In
Its 246th report has mentioned a recommendation by recognizing the concept of the emergency
arbitrator by widening the definition of the arbitral tribunal under Section 2(d) of Arbitration and
Conciliation Act for including emergency arbitrators. However, this recommendation was not
incorporated in the 2015 amendment Act. 
The said issue again came into the lead during the earlier widely disclosed dispute in Future
Retails v. Amazon, where the parties are Amazon, Future Group, and Reliance. In this Amazon
managed to get the interim order from the Emergency Arbitrator under the rules of SIAC. It
restrained Future Group from proceeding with a deal worth Rs. 24,700 crore for monetization of
retail business. At that time the question was raised about whether the passing of interim order is
enforceable in India or not. 
Hence, Reliance stated its intention publicly to go ahead with the sale. Currently, the position of
emergency arbitration in India is that such orders of emergency arbitration cannot be passed
against non-parties and the orders passed by emergency arbitrators especially in cases where the
arbitration took place outside India cannot be enforced directly. However, except for only this
limitation, the orders by emergency arbitrators have been quite famous and useful. 
In this case, Future Retails argued that the order of Emergency Arbitrator is not valid in India.
Because the Arbitration and Conciliation Act doesn’t recognize Emergency Arbitrators. Hence
the order given by EA doesn’t comply with Section 17(1) of the Act, making it unenforceable
under Section 17(2) of the said Act. However, this point has been prosecuted before the High
Court of Delhi, involving two different but interlinked cases Future Retails v. Amazon
and Amazon v. Future Coupons. The court after observing the issues, the validity of the
order/award given by EA, gave its decision in favour of recognizing emergency arbitrators as
legitimate arbitrators under Indian law.