Alternative Dispute Resolution ADR

 Alternative Dispute Resolution

Section 89 and Order X Rule 1A to IC of the Code lays down the provision for settlement of disputes through alternative modes. This was added in the Code by way of Amendment in 1999 on the recommendation of Malimath Committee with the object to help the litigants to settle their dispute outside the court instead of going through elaborates process of the court trial.

Formation of settlement: Section 89 provides that where it appears to the court that there exists elements of settlement which may be acceptable to the parties, the court shall formulate the terms of settlement and give them to the parties for their observations and after receiving the observations of the parties for their observations of the parties, the court may reformulate the terms of possible settlement and refer the same for resolution by way of any of the modes provided therein.

Modes of settlement of dispute: Section 89 provides for the following modes of settlement of dispute outside court:

1. Arbitration
2. Conciliation
3. Judicial settlement Including Settlement in Lok Adalat
4. Mediation

(a) Arbitration: In this process, an arbitrator appointed by the parties or by the court adjudicates the dispute between parties to the suit and passes an award by the application of the provisions of Arbitration and Conciliation Act, 1996 in so far as they refer to arbitration. Such award is enforceable as a decree of the civil court.

(b) Conciliation: Settlement by conciliation means the process by which a conciliator appointed by the parties or the court conciliates the dispute between parties in accordance with Arbitration and Conciliation Act, 1996 by making proposals for a settlement of dispute and by formulating or reformulating terms of possible settlement and has a greater role than mediator. Once the settlement is signed by the parties and the court, it can be enforced as a decree of civil court.

(c) Judicial settlement including settlement in Lok Adalat : Judicial settlement means a final settlement by way of compromise entered into, before a suitable institution of person to which the court has referred the dispute and such person or institution shall be deemed to be Lok Adalats under the provisions of Legal Services Authorities Act, 1987 and provisions of the Act will apply on resolution of dispute accordingly. The court may also directly refer the dispute to Lok Adalat established under the Act of 1987.

(d) Mediation: In this process, the mediator is appointed by the parties or the court who mediates the dispute between the parties by facilitating discussion between the parties directly or by communicating with each other through mediator, by assisting parties in identifying issues, reducing misunderstandings, clarifying priorities, exploring areas of compromise, etc. to resolve the dispute by emphasising that it is parties own responsibility for making decision which affect them.

Procedure to be followed [Order X, Rule 1A to 1C]: The following rules have been inserted in Order X by the Amendment of 1999 directing the court to opt for any one mode of alternative dispute resolution:

1. Accordingly to Rule 1A, after recording admissions and denials of the parties to the suit, the court shall, before proceeding with framing of issue, direct them to opt either mode of settlement outside the court as specified in Section 89 of the Code.

2. If the parties opt for such settlement, the court shall fix the date of appearance before such forum or authority as opted by the parties, who shall appear before such forum or authority for conciliation of suit [Rule 1B].

3. If the presiding officer of the forum or authority is satisfied that it would not be proper to settle the dispute outside the court, it shall refer the matter back to the court for trial and direct the parties to appear before the court on the date fixed by it [Rule 1C].

So, if the matter is capable of being settled by such forum or authority, the dispute shall be resolved by them accordingly.

Section 89- Whether mandatory provision?: Having a hearing after completion of pleadings to consider recourse to A.D.R. process under Section 89 of the code is mandatory. However, in the case of Afcons Infrastructures Ltd. v. Cherian Varkey Contructions Co. (P) Ltd., (2010) & SCC 24 (38), Supreme Court held that actual reference to ADR process is not mandatory in certain cases such as where the interest of a number of persons are involved, cases relating to election to public offices, cases involving grant of authority by court after inquiry, or involving allegations of fraud, forgery claims against minors, etc. The court held that the process of ADR can be resorted to in the following cases:-

1. All cases relating to trade, commerce and contracts;

2. All cases arising from strained relationships, such as matrimonial cases;

3. All cases where there is need for continuance of a pre-existing relationship;

4. All cases relating to tortuous liability, including motor accidents claims;

5. All consumer dispute cases.