CHALLENGES IN INTRODUCING

ADR SYSTEM IN INDIA

Submitted by:

Registration number: (08A008)

Submitted to: Mr. Vikas Gandhi

Faculty, (Alternative Dispute Resolution, Gujarat National Law

University)

i

TABLE OF CONTENTS

Acknowledgement...........................................................................................................ii

List of abbreviations......................................................................................................iii

List of Cases....................................................................................................................iv

Introduction.....................................................................................................................1

Challenges in introducing adr system in india: a brief overview.................................2

Legislative problems.........................................................................................................4

Intervention of courts.......................................................................................................6

Cultural norms..................................................................................................................9

Adequate human resources............................................................................................11

Financial resources.........................................................................................................13

Lack of adequate political support................................................................................15

Conclusion.......................................................................................................................17

Bibliography....................................................................................................................18

ii

ACKNOWLEDGEMENTS

I would like to express my sincere gratitude towards Mr. Vikas Gandhi, faculty for

Alternative Dispute Resolution for giving me this golden opportunity to delve deeper into the

topic, ―Challenges in introducing ADR system in India‖ through detailed research on the time

barred dispute settlement mechanism of the WTO. It, indeed, broadened my horizon about

the subject and increased my knowledge to a great extent.

I would also like to thank my parents and colleagues, without whose help and support this

project would have been impossible.

(08A008)

iii

LIST OF ABBREVIATIONS

ADR Alternate Dispute Resolution

Edn. Edition

e.g. Example

No. Number

Para Paragraph

p. Page

Sec Section

US United States Of America

Vol. Volume

ICA International Commercial Arbitration

UNCITRAL United Nations Commission on International Trade Law

SCC Supreme Court Cases

iv

LIST OF CASES

Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445

Hooters of America v. Phillips, U.S. 4th Circuit Court of Appeals, CA-96-

3360-4-22, Decided: April 8, 1999

Indian Oil Corporation Ltd., v. Coastal Bermuda Ltd., [1990] 2 Lloyd‘s Rep.,

407

Konkan Railway Corporation v. Mehul Construction Co., 2000 (7) SCC 201

Oil and Natural Gas Corporation v. SAW Pipes, (2003) 5 SCC 705

SBP & Co. v. Patel Engineering, (2005) 8 SCC 618

1

INTRODUCTION

This project is a detailed study Challenges in introducing ADR system in India.

Understanding the Socio, Economic and Legal barriers affecting the Settlement of

Disputes. The Project deals in detail with these Problems and how does it affect the

Indian ADR system. Further, it provides suggestions to overcome these problems in

ADR mechanism in India.

AIMS AND OBJECTIVES

The aim of the project is to critically examine the Challenges in introducing ADR

system in India. Our aim is to conduct a critical study of these problems in the light of

various cases and also in reference to various other authorities on the subject.

HYPOTHESIS

The hypothesis so assumed in this study is that ADR mechanism is marred by various

Socio, Economic and Legal Barriers and that Government and citizens must work

hand in hand to overcome these Problems.

METHODOLOGY

In this project my research methodology is not an empirical one but analytical. To

prepare this project I had referred the books on ADR available in the Library of the

Gujarat National Law University, and also used the web browsing for my research.

2

Challenges in introducing ADR system in India: A Brief Overview

The Alternative Dispute Resolution (ADR) mechanisms slowly but gradually evolved to

provide justice to the persons in legal disputes. It is a process voluntary in nature and has

gained legal recognition in the contemporary world over a period of time. In India,

Arbitration is an ancient concept, finding its roots in ancient India. Panchayats are an

example of such out of court dispute resolution.1 The practice is still prevalent in villages

even today where senior villagers sits and resolve disputes of fellow villagers.

ADR in India is governed by the Indian Arbitration and Conciliation Act 1996. The

Arbitration and Conciliation Act, 1996 as applicable in India today was created on the lines

of the Model Law of the UNCITRAL (United Nations Commission on International Trade

Law) but Alternate Dispute Resolution as such was incorporated in laws of India as way back

in 18402. Over a period of time, processes, procedures and powers pertaining to Arbitration

and the right of parties to the same were incorporated in The Civil Procedure Code, Indian

Contract Act, Specific Relief Act and by further incorporation of Indian Arbitration Act

1899, subsequently repealed by the Indian Arbitration Act of 1940 and them finally by the

Arbitration and Conciliation Act, 1996 which came in force with effect from 25th January

1996.

As said above originally, in ancient India, ADR as we know today was the way disputes were

generally settled. The whole village by way of Gram Panchayat used to solve the problems of

the villagers by sitting together and mediating the problems faced by the two parties.3 Since

the advent of the modern legal system, this method of dispute settlement has largely been set

aside. Today, this age old method of dispute settlement has become corporate savvy and

exclusive to big concerns.4 It has become the talk of the boardrooms and the way the

corporate world now looks towards settlement of disputes.

1―The Report of the Expert Committee on Legal Aid: Processual Justice to the People‖,

Government of India, Ministry of Law, Justice and Company Affairs, 1973 Report

2 Act IX of 1840

3 K Ravi Kumar, ―Alternative Dispute Resolution in Construction Industry”, International

Council of Consultants (ICC) papers, available at www.iccindia.org, at p. 2

4 ―Report on National Juridicare Equal Justice – Social Justice”, Ministry of Law, Justice

and Company Affairs, 1977 Report

3

The reason as to why such a phenomenon is witnessed in our country is very interesting. First

of all, the process still is a very costly affair as very few people specialize in this field that are

competent enough to arbitrate on various matters, thereby resulting in making ADR a very

exclusive and high end service.5 Secondly, ADR is just too flexible in nature and there is no

guarantee in its proceedings. There is no set procedure which is required to be followed while

finding solutions through ADR. Such a system juxtaposed with the modern legal system

which is time-tested, predictable and follows a set procedure, becomes a much safer and

hence attractive option for dispute settlement for the common man than arbitration.6

Also, the Indian Law recognizes mainly Arbitration as a way of ADR which pretty much

curtails the full scope of ADR. The major drawback due to the same is that Arbitration

involves the principle of arbitrability of subject matter. Since most matters which have a

specific legislation to its name are left out due to the non-arbitrability of its subject matter,the

actual scope of ADR is heavily compromised on. It is important that if ADR has to reach the

common man and not just remain a corporate toy then it be allowed to spread out its wings

and fly. Fed up with the regular litigation in courts, business persons very smartly resorted to

arbitration, as a large number of companies in the world do, only to discover shockingly that

on most of the occasions it is even worse than litigation.7

5 Inaugural address by Justice K G Balakrishnan, Chief Justice of India, on International

Conference on

‗Institutional Arbitration in Infrastructure and Construction‘, New Delhi, October 16, 2008

6 Rishabh Sinha, Sarabjeet Singh, “Taking Alternative Dispute Resolution To The Common

Man”, National Law Institute University, Bhopal

7 Hernando de Soto, The Other Path, 1

st ed., Harper & Row (1989)

4

Legislative Problems

The 1996 Act was brought on the statute book as the earlier law, the 1940 Act, did not live up

to the aspirations of the people of India in general, and the business community in particular.

The primary purpose of enacting the 1996 Act was to conform to the UNCITRAL Model

Law and thus fulfil the international obligation and also to placate the business community.

Unfortunately, at that time there was no thorough scrutiny of the Model Law. While the U.K.

did not adopt the Model Law completely and several other countries, including the U.S.,

never went to adopt the Model Law, India adopted it fully.8 As a matter of fact, India simply

copied the provisions of UNCITRAL Model Law. No attention was paid to the special needs

of business community in India, the legal environment, social conditions, lack of judges and

infrastructure in the courts, etc.

The result was predictable – there would be chaos. Whenever there is chaos and confusion,

certain groups of people prosper. They make the most of the chaotic situation. The same

happened in India. During all this confusion with the enforcement of new law, the lawyers, as

always, emerged as the group benefiting most from the situation. As the situation was unclear

as to what would happen with the new sections in the new law, how the courts would

interpret different words and phrases, the business community‘s anxiety grew with each

passing day.9 Besides the lawyers, the retired judges also made a lot of hay. And, as the sun is

still shining bright, they are continuously making more and more hay.10

We will do well to

remember that judges and lawyers, somewhere in the heart of hearts, are not two different

sections. They are the same. Most of the judges, at some point of time in their career, have

been lawyers. Thus, it is a simple case of ‗you scratch my back and I will scratch yours‘.

Barring a few, with their spine intact, others give arbitration reforms only a lip service.

The new Act has, more than once, proved to be a legislative failure. A number of loopholes

have made this legislation a good example of ‗bad legislative effort‘. The definition of

8 Paul Whitley, “ARBITRATION IN INDIA”, Talk to the European Branch of the C.I.Arb. at

Salice d‘Ulcio, Italy, 9th / 10th April 2005

9 Kachwaha, Sumeet, “The Indian Arbitration Law : Towards a New Jurisprudence”, Int.

A.L.R. 2007, 10(1), p. 13-17

10 Javed, “Judicial Ambush of Arbitration in India”, L.Q.R. 2004, 120 (OCT), pp. 571-574

5

―Court‖11

in the Arbitration and Conciliation Act, 1996, is substantially different from that in

the earlier law of 1940. Due to this new definition, there is tremendous load of work on the

District Judge, which was earlier shared by other judges in the Civil Court. The experience of

the last ten years testifies it amply that the District Judge is not able to devote as much time

as is expected to arbitration matters and the cases are simply poling up. It adds to the delay

and makes matters worse for the litigants. The District Judge is the senior-most judge in the

district taking care of civil matters and as a matter of practice, she is also the senior-most

judge taking care of criminal matters as the Sessions Judge. The designation of the head of

the District Judiciary is, therefore, ―District and Sessions Judge‖. As the routine criminal

matters of bail, interim applications, etc. are much more urgent than the civil matters like

arbitration, most of the time of the District and Sessions Judge is devoted to criminal matters.

Even with the best of intentions, the District and Sessions Judge is generally not able to

earmark sufficient time for arbitration matters which require in-depth study.

Barring a few cities where the High Courts exercise ordinary original civil jurisdiction, all

matters pertaining to arbitration have to be filed in the principal Civil Court of original

jurisdiction in a district. By definition this is the Court of the ―District Judge‖. Any civil court

of a grade inferior to such principal Civil Court or any Court of Small Causes has been

intentionally kept out by the legislature. This leaves the Court of the District Judge and only

this court to have jurisdiction over arbitration matters.12

Thus, the arbitration matters keep pending and litigants have no option but to wait patiently.

At times, litigants do opt for extra-legal methods to settle the dispute which is not a good

practice for the economy and the society. It brings a bad name to the judicial system and

erosion in faith starts taking place. It also forces foreign investors and business partners to

perceive India as a place with slow-moving judiciary. Therefore, there is an adverse effect on

the business in particular and economy in general.13

11

Sec. 2 (e), The Arbitration and Conciliation Act, 1996

12 Special Address by Dr. S. Muralidhar, International Conference on ADR, Conciliation,

Mediation and Case Management Organised By the Law Commission of India at New Delhi

on May 3-4, 2003

13 Indu Malhotra, “Fast Track Arbitration”, ICA‘s Arbitration Quarterly, ICA, 2006, vol.

XLI/No.1 at p 8

6

INTERVENTION OF COURTS

The primary purpose of Alternative Dispute Resolution (ADR) methods, of which arbitration

is the most popular, is to avoid going to the court. However, intervention by courts is

inevitable. At times the interference is desirable so as to prevent the arbitration process from

going astray. Interference by courts is universal and is observed throughout the world. In

most of the jurisdictions, the subordinate judiciary is empowered to look into arbitration

matters, however, a number of matters reach the highest court. India follows the same system

and a large number of arbitration matters are filed in the lower courts

As arbitration is a creation of contract between the parties. Hence, party autonomy is the

heart and soul of each and every arbitration contract. However, this autonomy is not

unbridled. The applicable law and public policy provide the boundaries to this autonomy.

Rules of arbitral institutions also curtail the autonomy of parties. Moreover, intervention of

courts becomes necessary in cases of bias of arbitrators, misconduct of proceedings, etc.

Courts also intervene in setting aside or enforcing an award. Complete freedom to parties to

do what they like in an arbitration is not acceptable and the natural corollary is that complete

non-interference by courts in undesirable. For instance, in the Hooters case,14

the court

refused to uphold the arbitration clause and said,

“The parties agreed to submit their claims to arbitration-- a system whereby disputes are

fairly resolved by an impartial third party. Hooters by contract took on the obligation of

establishing such a system. By creating a sham system unworthy even of the name of

arbitration, Hooters completely failed in performing its contractual duty.”

Interference by courts in such cases is essential, desirable and should never be done away

with, howsoever strong the critics are.

Major thrust and legislative intent of the new Arbitration and Conciliation Act, 1996 is to

reduce excessive judicial intervention due to which the earlier Arbitration Act, 1940 suffered

serious infirmities. Section 8(1) of the New Act, therefore, makes it mandatory duty for the

judicial authority i.e. court to stay legal proceedings if started, where the subject matter has

14

Hooters of America v. Phillips, U.S. 4th Circuit Court of Appeals, CA-96-3360-4-22,

Decided: April 8, 1999

7

been referred to an arbitral tribunal. Similar provisions are made in connection with the New

York and Geneva.

The enactment of the 1996 Act was initially met with approbation by the Court in cases like

Konkan Case15

, (which stated clearly that the provisions of the 1996 Act unequivocally

indicate that the Act limits intervention of the Court with an arbitral process to the minimum)

but subsequent reality however, has been far from ideal. Even as a global study has indicated

that an overwhelming 91% of the respondents were against the mechanism of appealing

international arbitration, cases like ONGC Case16

and SBP & Co Case17

. Have sharply belied

governmental attempts to promote arbitration in India. ONGC Case witnessed the challenge

of an arbitral award on the ground that it was ‗in conflict with the public policy of India‘;

instead of taking a narrow interpretation of the phrase ‗public policy‘ as being something in

excess of a prima facie transgression of Indian law, the Court adopted a very broad

understanding of the same. The Court went on to equate ‗patent illegality‘ with ‗error of law‘

and held that any contravention of an Indian legislation would ipso facto make the award

violative of public policy.

The doors were thus flung open for the very rounds of painstaking judicial review that the

Act was put in place to avoid18

. SBP & Co further extended the scope of judicial intervention

when the Supreme Court ruled that it was within the powers of the Chief Justice of India to

adjudicate on issues like valid arbitration agreements and went on to state that the CJ could

even call for evidence to resolve jurisdictional issues while performing the function of

appointing an arbitrator when the parties failed to come to an agreement. The Supreme Court

went on to say that such decisions would be final and binding upon the parties. This

effectively flouted the principle of competence and thus amounted to a situation where the

arbitral tribunal‘s power to determine its jurisdiction was undermined.

Effectively therefore, Courts endowed themselves with powers which would substantively

delay arbitral proceedings (be it by raising specious objections to preliminary issues or by

15

Konkan Railway Corporation v. Mehul Construction Co., 2000 (7) SCC 201

16 Oil and Natural Gas Corporation v. SAW Pipes, (2003) 5 SCC 705

17 SBP & Co. v. Patel Engineering, (2005) 8 SCC 618

18 Aloke Ray, Dipen Sabharwal, “What Next for Indian Arbitration?”, The Economic Times,

29 August, 2006

8

sabotaging the appointment process) which goes against the fundamental reason for enacting

Section 13 of the 1996 Act. This thus brings us to what has been called the dispute between

high principles (stressing the need for justice, though the heavens fall) and low principles (an

equally insistent clamour to end litigation) in adjudication today19

. The expansion of the

Court‘s intervention into the judicial sphere has aroused serious misgivings; ONGC‘s

expansive interpretation of the term ‗public policy‘ has been followed by a catena of cases

which all reiterate the judiciary‘s right to review the arbitral award. In cases like Hindustan

Zinc Case,20

the Supreme Court has stated that awards could be set aside on grounds like

being contrary to the terms of contract since ONGC gave license for interference in such

grounds. This indeed sets a dangerous precedent since, as stated earlier; the encouragement of

ADR was based on a need to circumvent the lengthy court process.

The debate between finality and justice is perhaps best resolved by the reasoned judgment of

EVANS J., in Indian Oil Case21

where he held that ―these two factors are not inconsistent

with each other. If either of them is to prevail, then it should be the requirement of justice.

But justice, even fairness, is not an abstract concept. It has to be applied in this context

between two parties who were in dispute with each other and who agreed that the dispute

should be resolved by an arbitral tribunal. They agreed that the tribunal's award should be

final. But they agreed this on the basis that the arbitration procedure would be regulated by

law. The Court has statutory power to set aside an award when the arbitrators misconduct

themselves or the references. But it also has the unqualified discretion to remit the award to

the chosen tribunal. If the power is exercised, but only in circumstances when it would be

unjust not to do so, then there is not, in my judgment, an uncovenanted or an unacceptable

restriction on the agreed finality of the tribunal's award.‖

19

Zaiwalla, Sarosh, “Challenging Arbitral Awards: Finality is Good but Justice is Better” ,

20(2), Journal of International Arbitration , 2003

20 Hindustan Zinc Ltd. v. Friends Coal Carbonisation, (2006) 4 SCC 445

21 Indian Oil Corporation Ltd., v. Coastal Bermuda Ltd., [1990] 2 Lloyd‘s Rep., 407

9

CULTURAL NORMS

In general, the community throughout India is still manifesting its hostility to arbitration. The

continuing attitude of certain urban arbitrators being characterized by a lack of sensitivity

towards the national law of a developing country as ours and their mandatory application,

either due to the ignorance, carelessness, or to unjustified psychological superiority

complexes, negatively affecting the legal environment required to promote the concept of

arbitration especially in the field of business relationships.22

The arbitrators do not understand how things are done in various parts of India. Hardly any of

them have any connection with or understanding of traditions and cultures of whole India.

They do not even take the trouble to understand parties‘ perspective in the proceeding at

hand.

Of themselves, such comments might simply be a reflection of ―sour grapes‖ – parties finding

some reason to criticise a process which they feel is outside their control or delivers a result

which does not reflect their wishful thinking. If that were the only (or predominant basis) for

such comments, they would be easy to explain away.

People from different backgrounds (ethnic, religion, racial, caste etc.) often harbour

predisposed standpoints regarding each other‘s cultures, customs and attitudes. It is not

difficult to see how this could erroneously translate into a perception of bias vis an Arbitral

Tribunal which does not reflect the culture of one or more of the parties. Arbitrators above all

need to be aware of such considerations and adjust their approach accordingly.23

Unfortunately Politics and religion factors may also play a part in the dynamic which is the

relationship between the Tribunal and the parties. The role of the Tribunal should include

awareness of potential issues and using the process dynamically to avoid such issues

affecting the process negatively (a simple illustration of this might be persuading the parties

22

Sarah Hilmer, “Did Arbitration Fail India or Did India Fail Arbitration”, Int. A.L.R.

10(2), 2007, pp. 33-37

23 Khawar Qureshi, ―Cultural sensitivity and International Arbitration”, McNair Chambers,

accessed at www.McNairChambers.com, 29th

June 2008

10

to shake hands with each other at the beginning of the hearing, and taking other steps to

―break the ice‖, as well as making the atmosphere less confrontational).

Miscommunication is also a major barrier for arbitration in India. In a country which has

many languages, words spoken can often acquire a very different connotation when

translated.24

Body language, facial expressions and gestures can sometime send the wrong

signals.

How business is done in different cultures may reveal stark differences. In the not too distant

past, a nod and a handshake were often the only evidence to signify that an agreement had

been reached. Even now, some jurisdictions reveal very clear patterns of behavior in the way

business is done. Indeed, there have been dramatic changes over the past decade with

contracts in India becoming much more detailed and heavily negotiated than was previously

the case. However, the Tribunal needs to be alive to such potential differences of approach,

which might easily be interpreted otherwise as a lack of evidence to substantiate a particular

position.

24

Prathamesh D. Popat, “ Online Dispute Resolution In India”, Proceedings of the UNECE

Forum on ODR 2003

11

Adequate Human Resources

A system is as good as the people who work it. Because of a number of reasons – vested

interests of different professional groups being one of the most important – arbitration has not

been as efficacious as it should have been.25

Lawyers too, are often not trained in the law and practice of arbitration and there is a

tendency among them to prolong arbitrations, seek unnecessary adjournments, sandwich

arbitrations between their regular court appearances, etc., all of which add up to a lack of

standards in conducting arbitration in India. This has driven parties to opt for arbitration

outside the country (adding to the gravitational popularity of London and, increasingly,

Singapore as centres of international dispute resolution), or even go back to choosing

litigation in Indian courts as a `lesser evil'.

It is not enough to simply enact a progressive law on arbitration. It is much like having a

brand new stadium, a certified football and a first-rate football field. One also needs well-

trained players and referees who know the rules of the game.

The availability of skilled, trained and honest arbitrators as well as well-equipped arbitral

institutions is vital for the further success of arbitration in India. If there is an emergent

opinion that by choosing arbitration over litigation, parties have substantially diminished their

chances of getting good quality of justice, that would obviously bode ill for the future of

arbitration. What is needed is inculcation of a culture of arbitration among the key

stakeholders — the bar, the Bench, the arbitrators, arbitral institutions and the consumers of

arbitration and for them to display a sincere commitment to prevent the `banalisation' of

arbitration.26

Indian lawyers and judges will do well to be aware of and absorb some of the best arbitration

practices from jurisdictions which have a more developed culture of arbitration, if arbitration

is to provide the benefits it is capable of delivering. Ten years on, arbitration in India under

the 1996 Act is far from having fulfilled its potential and continues to be on probation.

25

Justice S.B.Sinha, “ADR and Access to Justice: Issues and Perspectives”, SCR, 2008

26 Nancy J. Manring,‖ ADR and Administrative Responsiveness: Challenges for Public

Administrators”, Public Administration Review, Vol. 54, No. 2 (Mar. - Apr., 1994), pp. 197-

203

12

Further, most ad hoc arbitrations or even institutional arbitrations in India are conducted by

retired members of the judiciary who by virtue of long tenures behind the Bench have got

accustomed to tedious civil procedure and evidence rules (which they are exempt from

applying to arbitration proceedings) and fall into that trap much too easily. As a result,

arbitrations effectively become a battle of pleadings and procedures, with each party trying its

best to stall if it works in their favour.

Moreover, having retired and having an opportunity to earn some post retirement money,

coupled with the fact that there is no fixed schedule of fees and it is totally up to the whim

and fancy of the Arbitrator to fix his fee, a self interest for prolonging the proceedings comes

into picture. Needless to say, quite a few arbitrators find it difficult to maintain that balance

unless they are either overloaded with work (in which case they are earning anyway) or they

find pride in quick disposal, monetary issues being irrelevant.27

The Arbitrator may not be

familiar with Arbitration law or how to properly conduct the process. Furthermore the retired

judge will also not be familiar with technical expert matters.

27

D. M. Popat, ―ADR AND INDIA: AN OVERVIEW”, THE CHARTERED ACCOUNTANT,

DEC 2004, p. 756

13

FINANCIAL RESOURCES

However, at any rate in India, it is becoming increasingly common for arbitration

proceedings being conducted at expensive venues. On several occasions, even when the

proceedings last for a very short duration, the parties have to pay for a whole day. If the

venue is a five-star hotel, the expense will be heavier.28

Parties feel embarrassed if they have

to reject request for an expensive venue.

On the other hand, there are places available, which are fairly decent and not as costly as five

star hotels. Several public institutions do make their conference rooms available for

arbitration and all facilities are available at inexpensive rates. The Commission has been

informed that in certain arbitrations which have been continuing for years, the costs of

meeting the expenses of the venue are running into lakhs of rupees. One party who is rich

enough may agree but another, not so rich, may not, but may have to share the huge costs

ultimately, depending upon the order of the arbitral tribunal as to cost in the award.

Another more important aspect is the huge expense in arbitrations. While the Judges who

decide cases in courts are paid by the State, the case of arbitrators is different. Parties have to

pay fee to arbitrators also. Lawyers‘ fee is anyway there whether before courts or before

arbitrators. These days fee payable to arbitrators is quite heavy. We have obtained the views

of lawyers and arbitrators. But we have to take care of interest of the parties also.

Further it needs to be considered what happens if the appointment of arbitrators is to be

automatic and if the appointing authority under Section 11 should consider nothing else.

The prevalent procedure before the arbitrators today is that at the first hearing, the claimant is

directed to file his claim statement and documents in support thereof. At the second hearing,

the opposite parties are directed to file their reply and documents. Then, the claimant files his

rejoinder at the third hearing. Normally at each of these stages, there are at least two or three

adjournments. Sometimes, applications for interim directions are also filed. Thus, today, the

first occasion for considering any question of jurisdiction does not normally arise till at least

6 adjournments have gone by. If the respondent is the State or a public sector undertaking, the

28

Christine Cervenak, David Fairman and Elizabeth McClintock, ―Leaping the Bar:

Overcoming Legal Opposition To ADR in the Developing World”, Dispute Resolution

Magazine, Spring 1998

14

number of adjournments are certainly more. Parties pay fees to the arbitrator s for each

hearing running into thousands of rupees.

If indeed it is a party‘s plea that there is no dispute that can be referred to arbitration (because

the contractor has given a ‗no claims‘ letter) or if it is the plea that the dispute is ‗excepted‘

from arbitration or if a person says, he is not a party to the arbitration, or that the arbitration

agreement is not in existence, these issues can normally be taken up only after at least five or

six adjournments have taken place. By that time, quite a large amount of money would

become payable towards the arbitration fees or may have been paid. Therefore, the cost factor

is also important for the parties and cannot be left out of consideration.29

Lastly, if the Government or a public sector undertaking has clear documents to show that

there is no dispute in existence or that the dispute relates to an ‗excepted item‘, or if a person

says, he is not a party to the arbitration agreement, there is no reason why an expensive

procedure of arbitration should be invariably embarked upon.

29

Indu Malhotra, ‗Fast Track Arbitration‘, ICA’s Arbitration Quarterly, ICA, 2006, vol.

XLI/No.1, p. 29

15

LACK OF ADEQUATE POLITICAL SUPPORT

India follows the doctrine of separation of powers. The three organs – Legislature, Executive

and Judiciary – work independently, however, there is definite overlap between the first two.

The President is the Chief Executive and also an integral part of the Union Legislature. All

the members of the Council of Minister, which is headed by the Prime Minister, must be a

member of parliament, and if not, must become a member within six months. Thus, the

Government has a definitive say in the legislative work. Due to coalition governments

coming to power for a number of years, the main ruling party‘s agenda must be acceptable to

other coalition partners and it surely dents the definitive say of the Government. In the last

couple of years it has become increasingly difficult for the Government to be sure of getting

even the bills introduced by the Government itself, passed in the Parliament. One such

example is the Arbitration and Conciliation (Amendment) Bill, 2003 which was introduced

by the Government of the day on the recommendation of the Law Commission. It becomes

even more difficult with clash of personalities and egos resulting in hijacking of law making

system by a couple of self-proclaimed Messiah of masses.

In 2001, the Sixteenth Law Commission, under the chairmanship of Justice B. P. Jeevan

Reddy, forwarded a report, number 176, to the Union Government suggesting necessary

amendments to the 1996 Act after five years of its coming into force.30

The then Union Law

Minister, Mr. Arun Jaitely, had expressed his desire to get the new law on arbitration

reviewed as various shortcomings were observed by the legal and business fraternity in its

provisions and certain representations received by the Law Minister.

The Commission initially prepared a Consultation Paper and held two seminars, one at

Mumbai and another at Delhi in the months of February and March, 2001 and gave wide

publicity to the paper by putting it on the website. Retired judges and leading lawyers were

invited for the seminars. Many luminaries also participated in the seminars and gave their

written notes putting forth their suggestions. Proposals not contained in the Consultation

Paper were also made and were exhaustively discussed. After making an in-depth study of

the law relating to subject, looking into the position of the law in foreign jurisdictions, the

30

Law Commission of India, One Hundred And Seventy Sixth Report On The Arbitration

And Conciliation (Amendment) Bill, 2001

16

Commission made various recommendations for bringing amendments in the 1996 Act. A

Bill entitled ‗The Arbitration and Conciliation (Amendment) Bill, 2001‘ had also been

prepared by the Commission bringing out various provisions through which the 1996 Act was

proposed to be amended.

The Government was supposed to act with alacrity so that the necessary amendments could

be made timely. With such an innocuous thing as the definition of ‗court‘, which should not

have been juggled in the first place, and for which there was agreement between all the

concerned parties and there was the recommendation of the Law Commission, the

Government did not act speedily resulting in further delay.

The Government took time in going through the Law Commission‘s report forwarded in

September 2001. It took two years to propose an amendment. On December 22, 2003, Mr.

Arun Jaitley, the then Law Minister, introduced the ‗Arbitration and Conciliation

(Amendment) Bill, 2003‘ (hereinafter the 2003 Bill) in the Rajya Sabha.31

The Bill proposed

several amendments.

Political rivalry has resulted in the withdrawal of the 2003 Bill. Even when the amendments

suggested by the Law Commission and later introduced in the Rajya Sabha as the 2003 Bill

are apparently in the interest of the people at large, clash of two giants is holding the nation to

ransom.

The question which needs to be raised at this time is the wisdom of simply copying a

legislation without modifying it to our needs. Also, it is high time to question the wisdom of

constituting so many committees to look into the recommendations of the Law Commission.

It is a well-known fact that Law Commission has very eminent legal experts as members.

Law Commission reports are a work of collective wisdom. How can it be questioned? Not

once, but so many times. How many times do we need to review the work done by the Law

Commission and then the Legislative Wing of the Government? This must come to an end.

Also, the persons constituting all these committees must introspect as to whatever they have

been doing in the name of reviewing the reports of the Law Commission is worthwhile or

not.

31

Bill No. LXXV of 2003, Introduced in Rajya Sabha on December 22, 2003; available at

http://rajyasabha.nic.in/bills-ls-rs/arch2003.htm, accessed on 20th

August, 2010

17

CONCLUSION

As discussed earlier, there are many legal, socio and economic problems in ADR mechanism

in India. These problems arise due to diverse and culturally rich population of India as well as

lack of political goodwill in this regard.

To overcome these barriers Government must act strictly and should first of all adopt 176th

Law Commission‘s Report. Coupled with this Government at both state and Union Level

must come up with awareness programmes not only for the citizens but also for the

arbitrators. ADR is a fairly new concept and concepts like these not only take time in

percolating to the grass root levels, acceptance of such a concept is also a big problem.

Therefore a robust programme imparting legal literacy to the masses in India, especially in

the field of ADR becomes a necessity. Not only will this allow bringing ADR to the common

man, an aware citizen will contribute positively to the development of the nation too.

The common citizens are also to be blamed for this error in ADR mechanism too. People

should opt for ADR instead of litigation and use this mechanism wisely in order to get speedy

and cost efficient justice. The purpose which ADR was supposed to achieve. The legal

education of today‘s India needs to take the ADR mechanisms seriously. Today these

mechanisms are taught only as part of speciality courses which primarily focus on the

deployment of these processes pertaining to areas of corporate mergers and amalgamations.

India is a nation which epitomises a subtle mix of the modern and the ancient. The

preservation of the best of both is what Indians are best at. Keeping in mind the same spirit of

India, the common Indian of today should get the best of all the dispute resolution

mechanisms in India. The motive behind any legislation, amendment or new introduction has

and always been the welfare of the ordinary citizen of the country.

18

BIBLIOGRAPHY

References

1. Ashwinie K Bansal , Arbitration : Procedure and Practice, LexisNexis India

2. Avatar Singh, Law of Arbitration and Concilliation, Eastern Law Book Company

3. N V Paranjape, Arbitration and Alternate Dispute Resolution, 2006

Websites

1. www.lexisnexis.com

2. www.westlaw.com

3. www.jstor.org

4. www.wto.org

5. www.heinonline.com