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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, 1st 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