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RECENT DEVELOPMENT OF ADR IN INDIA AND HOW TO IMPROVE THE FRAMEWORK

Author: Anuj Chhabra, I year of B.A.,LL.B.(Hons.) from RGNUL, Patiala

Co-author: Srijan Garg, I year of B.A.,LL.B.(Hons.) from RGNUL, Patiala


Abstract

Thanks to recent improvements in the legal system, most issues are now resolved without the necessity for a formal trial. Alternative Dispute Resolution is used to resolve the majority of energy, financial services, and aviation disputes. Special forums/tribunals that are more administrative than courts are used to address several unusual situations. In the United States, ADR is well-known for its campaign for law reform intended at enhancing justice administration. Concerning the progress of ADR as a result of modifications to various countries' arbitration laws. ADR not only promotes efficiency, flexibility, party empowerment, and fairness, but it also enhances efficiency, flexibility, and party empowerment. Over 200 countries have signed negotiation treaties and have chosen to use the international forum to resolve problems that may start at any time. Arbitration provides a forum for two nations to resolve boundaries, and borderline, and bridge commercial conflicts via discussion and mediation. As a result, because ADR is the most comprehensive method of settling disagreements between participants, it is used by the majority of legal professionals and philosophers.


Introduction

Alternative dispute resolution (ADR) is a legal technique for resolving conflicts outside of the judicial system. It is one of the fastest-growing and evolving legal sectors. Many organizations, enterprises, unicorns, and new developing entrepreneurs are all turning to the alternative dispute resolution system to prevent unnecessary legal battles and save money and time. Apart from going to court for small matters, ADR may be used to resolve disputes which may arise from a relationship or a transaction in a simple, straightforward, and time-saving manner. It deals with family law, business contracts, negligence, partnerships, and public conflicts, among other things.


In his Important lecture at the India-Malaysian Mediation Conference, "Making Mediation Mainstream: Reflections from India and Singapore," the Chief Justice of India ("CJI") delivered a clarion plea to make mediation a necessary first step in the resolution of every admissible dispute. He went on to say that an omnibus bill is needed to fill the void in India's Mediation system. The CJI highlighted that the clarion call is not confined to Mediation alone, but also includes Conciliation and other types of Alternative Dispute Resolution ("ADR"). The motive of this paper is to investigate this remark in light of the Indian ADR landscape and to consider whether ADR should be made mandatory in India.[1]


Amendment in 2021

Among the most recent amendments to the Arbitration and Conciliation Act of 1986 is the Arbitration and Conciliation (Amendment) Act 2020. The Act of 1986 has been amended multiple times in the last 7 years, indicating a legislative intent to revise the Act of 1986 and make the country more international arbitral. The major changes introduced by the amendment are:

  • One of which is to allow judgments to be immediately delayed in certain instances if the judge rules prima facie indications of "cheat" and "administration" in the agreement upon which judgment is founded.

  • Another notable change in the Act of 1986 is the removal of the eighth schedule from the headlining Event. It specifies the qualifications, expertise, norms, and principles that must be followed for proper judge arbitration. [2]


Effects of Amendment of 2021 on ADR in India

  • The impact of the automatic stay on awards

By changing Section 36 of the previous Act, the Amendment Act of 2021 marks the first important change to the question of Arbitrational Awards. A person can go to the court to have the arbitration judgment set aside, according to Section 34 of the main statute. The Amendment Act of 2015 clarified that an automatic hold on the implementation of awards cannot be acquired merely by completing a document to set aside the award. The Amendment of 2021 now includes a clause under Section 34(3) that assures the judgment that the action is based on either the arbitrator agreement or the contract that constitutes the backbone of the conviction and that the judgment was created or affected by fraudulent activity. It should have to postpone the prize until the issue is rectified. It will take effect on October 23, 2015, because it is retroactive.


The entire or unconditional stay was often questioned in Parliament during Bill's presentation in the Lok Sabha. Several analysts have noted that this blanketed prize postponement is a universal hold, which would hinder India's efforts to develop a pro-arbitration process. This was claimed primarily so because parties are anticipated to lose widespread corruption allegations and the inevitable halt on the enforcement of arbitration rulings.


It's also been said that sending participants to courts and subjecting them to lawsuits contradicts the goal of alternate resolving conflict. Another major issue with this proposal was that it doesn't describe misconduct or deception. It will immediately create an uncertain position wherein the accused party, even if correct, may suffer a severe litigation procedure, and it will also overload the judicial process, allowing a large number of lawsuits to be filed. [3]


  • Broadening the reach of the arbitrators' qualifications

This section contains three amendments, which include the 2019 Amendment, which is related to the 2021 Amendment. The addition of Section 43(j) to the original or main Act defined the qualifications, eligibility, and certification standards. The Act's 8th schedule, which offered a comprehensive list of requirements for anyone seeking the office of an arbitrator, was also ordered by this clause. The minimal qualifications for a person with a bachelor's degree and 10 years of experience in a technical or scientific field were included in the timetable. Following the specialist level certification, the timing also included the ordinary standards that an arbitrator must meet to be accredited, such as honesty, fairness, impartiality, and neutrality.


These requirements and general guidelines were so extensive that this part, among other things, barred qualified foreign lawyers from functioning as arbitrators in India. In comparison to arbitration-friendly regions like France, it appeared to be a considerable barrier.


Section 43(j) of the Act was substituted in the 2021 Amendment, and the 9th schedule was removed from the previous Act. It said that the parties, regardless of their credentials, can appoint the arbitrator. The Lok Sabha praised the bill, saying it will get great arbitrators from around the world and help India become a global center for international arbitration. [4]


Suggestions to Improve the ADR Framework

  • Third-party funding of Arbitration

Because litigation funding affects an organization's cash flows, EBITDA ratio, and value, it is expensive. Rather than investing funds in costly litigation, firms may employ litigation financing to put their limited money to better use, such as in systems manufacturing and capacity increasement. Because of the no-cost-of-capital third-party financing, the company's operating income and its value both improve. Future litigation settlements are commonly discounted at an IRR that financiers are willing to support, leading to a major victory for all parties.


Since neither obligations nor segment owing is accounted for in Indian financials, offering the possibility of a lawsuit for a predetermined quantity of money, coupled with the cost reductions from subsequent proceedings, is extremely beneficial to a firm. China's Civil Law Act was lately amended to allow third-party sponsorship for adjudication and related processes. Third-party sponsorship for arbitration proceedings and consultations was voted to legalize in Hong Kong. Third-party financing has also been approved by the French Bar Council. The Supreme Court of India has ruled on the legality of TPF in a lawsuit, noting that "There appears to be no prohibition on other persons (non-lawyers) supporting the action and obtaining payment after the litigation's conclusion." The Krishna Committee Report, published in 2016, advocated third-party funding for arbitration in India.[5]


  • Emergency Arbitration

The extraordinary arbitration provision can be used in cases requiring immediate help, as the parties have done during the epidemic. However, the application of emergency rulings and decrees in arbitration proceedings held in India is plagued with legal ambiguity. In its 248th Report, the LCI urged for the notion of an independent mediator to be authorized by placing emergency panelists in the description of an arbitration panel under section 4(e) of the ACA. The 2015 Amendment Act, however, did not incorporate this provision. The same conclusion was reached by the Sai Krishna Committee. The same problem arose again during the previously highly publicized dispute between Amazon, Future Group, and Reliance in Future Retails v. Amazon. Under SIAC procedures, The Extraordinary Arbitration granted Amazon a temporary order. It prevented Future Group from executing a Rs 28,900 crore transaction to monetize the retail industry. The topic of whether an injunction is order was effective in India was questioned at the moment. As a result, Reliance announced its decision to proceed with the transaction publicly. The present state of emergency arbitral proceedings is that such judgments cannot be rendered against non-parties, and emergency arbitrators' judgments cannot be directly executed, particularly when the arbitration took place outside of India. Aside from this limitation, temporary arbitration orders are becoming well-known and useful.


Future Retails maintained that the Emergency Arbitrator's ruling was not valid in India. Because Emergency Arbitrators are not recognized under the Arbitration and Conciliation Act. As a consequence, EA's decision breaches Section 18(3) of the Act, declaring it unconstitutional under Section 18(3). However, this issue has been fought in the Delhi High Court in multiple opposite but connected instances, Future Retails v. Amazon and Amazon v. Future Coupons. After taking into account the issues raised, including the legality of the EA's purchase, the court determined in support of extraordinary administrators being certified as real arbitration under Indian law. [6]


  • Reliance on Technology

The COVID-19 epidemic has already changed the way mediation hearings are performed around the country. In India, litigants and courts have also surmounted their initial qualms and incorporated innovation. It is realistic to assume that even when the world returns to normalcy, technology will play a considerably larger role.[7]


Conclusion

ADR can be said to be one of the most important legal entities, and it has a promising future. Its structure and procedure vary throughout time in a variety of ways to resolve issues and make life easier for all involved. Varied growing provisions in ADR help to improve its various elements. The new enhancements gave a comprehensive foundation as well as accessibility to the ADR mechanism, allowing for a successful treatment.


The Indian position on ADR is pre-dominantly non-mandatory. Whilst Section 89 does impose a duty on the court to consider ADR, the government is not required to compel participants to any type of ADR. Furthermore, the parties have no comparable obligation to consider ADR. The only legislation that appears to obligate the participants to come to ADR (Mediation) is the Commercial Court Act. A drawback of not imposing a duty on the parties to consider ADR is that, if the parties are not pressurized with some detriment for failing to at least consider ADR, the parties become entrenched in their respective positions, instead of making genuine attempts at settling the disputes through ADR.[8]

[1] Lawself.com, History with Alternative Dispute Resolution, Available at- https://lawself.com/coursewarrencontentview/history-of-alternative-dispute-resolution, Accessed on 08/05/2022 [2] Jamsadr.com. Recent Trends in Alternative Dispute Resolution. Available at: https://www.jamsadr.com/publications/2002/recent-trends-in-alternative-dispute-resolution Accessed on 08/05/2022 [3] Giussheppe Pe Dalo, "Ten Year Long" EU Mediation Paradox" When EU Directive Wants More Directive." Accessed at- https://www.europarl.europa.eu/RegData/etudes/BRIE/2018/608847/IPOL_BRI(2018)608847_EN. Pdf, on 08.05.2022 [4] Mondaq.com. Recent Developments In India-Related International Arbitration – International Law – India. Available at: <https://www.mondaq.com/india/international-courts-tribunals/737816/recent-developments-in-india-related-international-arbitration>. Accessed on 08/05/2022 [5] Tax Guru, Recent Development for The Arbitration for India, Available at- https://taxguru.in/corporate-law/developments-arbitration-sector-india.html, Accessed on 08/05/2022 [6] Mediate.com. the Australian Experience Of Pre-Litigation ADR Requirements. Available at: https://www.mediate.com/articles/RooneyG3.cfm. Accessed on 08/05/2022 [7] Nortonrosefulbright.com. 2020. Alternative Dispute Resolution ADR. Available at: <https://www.nortonrosefulbright.com/en-cn/services/357d79cb/alternative-dispute-resolution-adr. Accessed on 08/05/2022 [8] Lexology.com. A Glimpse into The Future Of Alternative Dispute Resolution In China | Lexology.] Available at: <https://www.lexology.com/library/detail.aspx?g=50d68969-e072-4186-951e-c890ecc7e598>. Accessed on 08/05/2022