ALTERNATIVE DISPUTE RESOLUTION – ARBITRATION AND CONCILIATION
Litigation is well a recognized system for settlement of dispute in India. The courts are financed by the State and have formal rules for settlement of disputes. The decision of the court is binding on the parties, but it is subject to appeal to the higher court. Judge is imposed on the parties by the system and parties have no choice to have a particular judge. The system is highly technical and formal and judge controls the process as well as out come of the litigation. The dispute is heard in the open court and any one can be present in the court to hear the dispute. The presentations are governed by the rules imposed by the statute/authority. Process is very costly and time consuming hence it is not suitable for business disputes.
Arbitration is a procedure in which dispute is submitted to an arbitral tribunal chosen by the parties which makes a decision on the dispute that is binding on the parties, subject to appeal on very limited grounds. Presentations by the parties are limited by the rules agreed by the parties. The arbitral tribunal controls the process and outcome of the dispute. Generally the hearing is in private and strangers cannot be present. Arbitration is generally intended to provide speedy economic and fair results.
Arbitration takes its own time to reach settlement and proceedings may take generally one to three years to be completed. Many a time, it is felt that the arbitral process has been judicialised like courts. Arbitration is governed by rules and practices which are becoming more and more sophisticated and complex. The detailed rules and prescribed procedures may be fairer and more just but these may not serve the purpose of parties needing earliest resolution of business disputes. The Supreme Court of India in M/s. Guru Nanak Foundation V. Rattan Singh & Sons (AIR 1981 SC 2075 ) has also highlighted this point and had commented on the proceedings under Arbitration Act, 1940 as below:
“Interminable, time consuming, complex and expensive forum, less formal, more effective and speedy for resolution of disputes avoiding procedural claptrap and this led them to Arbitration Act, 1940 (Act for short). However, the way in which the proceedings under the Act are conducted and without an exception challenged in Courts, has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical accompanies by unending prolixity, at every stage providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of their disputes by the decisions of the courts been clothed with ‘legalese’ of unforeseeable complexity.”
There are many developments in ADR law and facilities in India in the recent past. In view of recommendations of the Law Commission of India and arbitration bodies the Arbitration Act, 1940 was repealed and a comprehensive ADR law was adopted by the enactment of the Arbitration and Conciliation Act, 1996 Act. Now there is a better alternative for resolution of business disputes. The new Act has initiated the ADR: Conciliation movement in India. It has formally recognised and included conciliation as a mode for settlement of disputes in India. A settlement in conciliation is as binding as a decree of the court.Now more attention is being given by govt. and courts to resolve disputes through ADR, particularly by conciliation. The International Centre for Alternative Dispute Resolution (ICADR) has been established at the initiative of leading legal luminaries in India for promotion and development of ADR facilities and techniques to facilitate early resolution of disputes and to reduce the increasing burden of arrears in courts. The ICADR is an autonomous organization working under the aegis of the Ministry of Law and Justice, Government of India, with its Headquarters at New Delhi and Regional Centres at Hyderabad, Mumbai and Bangalore. Now the Parties can approach ICADR for various services for resolution of disputes by ADR. Parties generally introduce ADR Machinery in the agreement at the time of signing of the business contract for resolution of differences that may arise during execution of the contract.
Conciliation is voluntary and non-binding process in comparison to arbitration and litigation. Any party may terminate conciliation proceeding at any time even without giving any reason. The other important difference is that parties control the process and outcome of the dispute. Parties give up control of the outcome and the conducting of the process in arbitration as well as litigation. Conciliation is a consensual process where litigation and arbitration are adjuratory processes in which parties have no control on the outcome of the dispute or the process.
In litigation, conciliation is well known as compromise settlement. Number of disputes are settled before adjudication in the courts by the parties with efforts of the judges and compromise decisions are recorded which bind the parties.
Lok Adalats, that adopt conciliation approach are organised with financial assistance by the Govt. and monitored by the judiciary. Lok Adalats are very successful in cases relating to motor accidents, land acquisitions, family disputes, mutation of land, encroachments on various land, bank loans, workmenship compensation and compoundable criminal offences. Lok Adalats have set conciliation process in motion in India. In Lok Adalat voluntary efforts are aimed at bringing about settlement of disputes between the parties through conciliatory and persuasive efforts, and provide speedy and inexpensive justice. Members of Lok Adalats act as conciliators. Lok Adalats have assumed statutory recognition under the Legal Services Authorities Act, 1987 that was enforced w.e.f. 9.11.1995.
Supreme Court of India in State of Punjab Vs. Geeta Iron & Brass Works Ltd, AIR 1978 SC 1608 had emphasized that Governments must be made accountable by Parliamentary Social audit for wasteful litigate expenditure inflicted on the community by inaction. A statutory notice of the proposed action under S. 80, C.P.C. is intended to alert the State to negotiate a just settlement or at least have the courtesy to tell potential outsider why the claim is being resisted. Government of India and State Governments are the largest litigants in India. Section-80 of CPC is a provision to initiate conciliation and gives an opportunity to the Government to settle the matter amicably prior to institution of a suit in the court. The object of the section is to afford the public officer concerned an opportunity to reconsider its legal position and to make amends if so advised without litigation. But now S.80 has become a ritual because the administration is often unresponsive and hardly lives up to the Parliament’s expectation in continuing S. 80 in the Code despite the Central Law Commission’s recommendations for its deletion. An opportunity for settling the dispute through arbitration was thrown away by sheer inaction. A litigative policy for the State involves settlement of governmental disputes with citizens in sense of conciliation rather than in a fighting mood. Indeed it should be a directive on the part of the State to empower its law officer to take steps to compose disputes rather than continue them in court.
Section 89 of the C.P.C. was inserted by section 7 of the Code of Civil Procedure (Amendment) Act, 1999 that was enforced in 2002 to promote ADR in courts. Maharashtra has taken the lead in conciliation by opening ADR centers at every district level and providing ADR training to the judges. It is a the duty of the courts, under C.P.C. to make efforts and assist parties in work for settlement in category of suits/proceedings, such as litigation by or against Government or public officers in their official capacity, litigation relating to matter consisting the family etc. Provisions are also contained in The Hindu Marriage Act, 1955, the Family Courts Act 1994 and Industrial Dispute Act, 1947 for settlement of dispute through conciliation.
In litigation and arbitration one party wins and other loose. But in conciliation both parties may be winners as decision is acceptable to both. Both parties have control on the decision in conciliation and until both parties agree to a proposal, the settlement agreement does not take place. The parties have control on the process of conciliation and they can choose the rules for conciliation as per their choice. The conciliation proceedings can be terminated by a written declaration of a party to the other party and the conciliator to the effect that the conciliation proceedings are terminated. It is a non-binding process and any party may walk out from conciliation proceeding at any time. This is unlike arbitration and litigation where decision can be made even if a party walks out.
Conciliation is economical and cheap in comparison to arbitration and litigation. In arbitration and litigation focus of parties remains on the past and they have to give evidence to prove the cases, but in conciliation focus is shifted to solution of the dispute and generally no evidence is required hence dispute is settled at lessor cost and in lessor time. Cost of conciliation is comparatively low due to elimination of delays and general avoidance of evidence and long arguments. The cost management techniques prevent multiplication of actual costs to the parties. It seeks to make conciliation cost efficient. ADR ensures resolution of disputes in very short period. The time management techniques prevent continuation of conciliation proceedings for longer periods and ensures completion of the same within a reasonable period. It can be used to large number of contentious issues between the parties and can be terminated at any stage. As outcome of the dispute is consented by both parties and both parties are satisfied with the agreement. The parties retain good relationship after settlement of dispute, whereas in litigation and arbitration the parties may have hot good relationship even after settlement of disputes. It keeps dispute a private matter between the parties and promotes creative and realistic conciliation. Conciliation is flexible. Even a failed conciliation proceeding is not waste of time and money since it helps the parties to appreciate each other’s case better.
Conciliation allows for a wide range of options to be considered and parties may choose such a solution maximizing the gains to the both. The parties may find out solutions by which they achieve goals with little cost or no cost to other side. In litigation there are many cases in which both parties loose in terms of cost, time and outcome. But in conciliation both parties may gain by creative process and maintaining relations.
Process of conciliation provides an opportunity for settlement of dispute without publicity. The conciliator and the parties have to keep confidential all matters relating to the conciliation proceedings. Confidentiality extends also to the Settlement Agreement, except where its disclosure is necessary for purposes of implementation and enforcement.In order to facilitate the conduct of the conciliation proceedings, the parties, or the conciliator, with the consent of the parties, An Institution has following functions -
a) to arrange and provide facilities for hearings may arrange for administrative assistance by a suitable institution or person.
b) to arrange interpreters and transcripts
(c) to act as a conduit of exchanges of papers among the parties
and conciliators.
d) to arrange for deposit to cover conciliators fees and other
expenses.
e) establishing and reviewing the conciliator’s fees.
f) providing other secretariat assistance.
ADR Techniques such as conciliation, negotiation and mini-trials have the benefit of less time and less cost but there is no assurance that there will result in a settlement of disputes as these are non binding and voluntary modes. These techniques bring the parties together but the settlement is not compulsory. Any party may walk out of such proceedings at any time or may not agree even to a very fair settlement. nIt happens many times that for the respondent, it is a case of either total liability or no liability and to avoid liability he may refuse even a fair settlement.
All kind of disputes can be settled by conciliation provided parties are willing for the early settlement and their interests are not entirely in-compatible. Conciliation can be used in almost all contentious matters that are capable of being resolved under law by agreement between the parties. Conciliation can be employed in civil categories of dispute in particular commercial, industrial and family disputes. Conciliation is successful in disputes relating of banking, contract performance and interpretations, construction contracts, intellectual property rights, insurance coverage, joint ventures, partnership differences, personal injury, product liability, professional liability, real estate etc. Conciliation can be used at any time even during pendency of a case in the court of law.Conciliation is alternative as well as supplementary to arbitration. Segmentation of issues for settlement by conciliation and by arbitration is also possible to meet special requirements in big contracts, such as civil engineering contracts in which certain urgent disputes can be settled immediately by conciliation even during execution of the contract so that the project is completed in the stipulated period and remaining disputes can be decided by arbitration/litigation.
The business dispute can be settled within few hours or few days if parties are willing to adopt conciliation. It is the need of day when a large number of cases are pending in courts. It can be applied in most of the cases without risking the fairness and finality of any settlement so arrived at. It is a mode in which justice is hurried but it is not buried.
Those commercial disputes where both parties may loose due to cost and delay in settlement are fit to be settled by conciliation but those dispute where one party gains by delaying the settlement may not be settled successfully by conciliation.