In India, the legal or the justice system that isbeing practiced is adversarial system. In this system there are two parties,each represented by an advocate who present their own set of arguments andwitnesses, before a Judge who is neutral and ultimate truth decider of thecase. Since a huge number of cases are piled up in the ordinary courts, therearrived a need for alternative dispute resolution method, giving birth to the non-adversarialsystems, presenting a new mechanism for resolution of disputes, known asAlternate Dispute Resolution (ADR) Mechanism imbedded under Section 89 of theCode of Civil Procedure (CPC), Amendment Act, 1999 making mandatory for thecourts to refer the disputes to appropriate ADR mechanisms, so as to enable theparties to settle the dispute amicably without going for litigation.
The oldprovision under CPC has reference only to Arbitration and the procedure ismentioned under Second Schedule of the CPC. But after the amendment to theCode, for cheap and expeditious resolution of disputes, the ADR Mechanism hasbeen settling disputes through Arbitration, Conciliation, Mediation, JudicialSettlement and Lok Adalat, where the parties can settle their civil disputeswith the help of an independent third party and these methods doesn’t requireany formal court hearing. Lok Adalats or Peoples’ Courts resolve the disputes thatare in a pre–litigation stage, through methods like Conciliation andNegotiations and are governed by the Legal Services Authorities Act, 1987. Thesedecisions are binding on both the parties and no appeal shall lie to any otherCourt of law. The first legislation regarding the ADR Mechanism was theArbitration Act, 1940.
But this Act was certainly not meeting the current needsand requirements of resolution of disputes. So, the Government of India came upwith “The Arbitration and Conciliation Act, 1996”, for resolution of bothdomestic and international disputes quickly. Arbitration is a formal process where disputesbetween the parties are decided and resolved by an independent arbitrator,outside the Court and whose decisions are legally binding on both the parties.Usually, the commercial agreements contain the arbitration clauses, wherein theparties to the contract agree to resolve their disputes, if any, by anarbitration process. Mediation is also a non-binding procedure, where a thirdparty known as mediator tries to facilitate the resolution process but cannotimpose the resolution, as the parties are free to decide according to theirconvenience and terms.
Another non-binding procedure is Conciliation, where aconciliator, upon the request by the parties, assists the parties to a disputeto arrive at a mutually satisfactory and agreed settlement of the dispute. Though all of these forums are at the same footingin the eyes of law, the most pursued forum amongst them is the Arbitration,since it is a process, which is only available at the consent of the parties. Incase of arbitration and conciliation, the courts doesn’t have the power torefer the dispute to arbitration, unless there is consent of both the partiesto the dispute. Section 89 of the Code has brought revolutionary changes interms of the ADR practices in India. In spite of Arbitration being an effectivetool of resolution of disputes, there are certain loopholes that are to beresolved. With the advent of the 1996 Act, the cost for arbitration is high andthere is delay in proceedings which has made it the replica of courtproceedings and not solving the purpose. The issue of appointment, independenceand fees of the arbitrator was resolved by the Arbitration and Conciliation(Amendment) Act, 2015.
LIST OFAMENDMENTS OF ARBITRATION AND CONCILIATION ACT, 1996To make arbitration as a preferred mode for thesettlement of any commercial disputes and also to make India a hub ofinternational commercial arbitration, the Government of India has come up withan idea to amend the Arbitration and Conciliation Act, 1996 and the Arbitrationand Conciliation (Amendment) Bill, 2015 was eventually passed in theparliament. On 23rd October, 2015, the President of Indiapromulgated the “Arbitration and Conciliation (Amendment) Ordinance, 2015″thereby amending the Act, 1996. The most important changes that were made bythis amendment are listed as follows.1. The foremostchange that is made to the Act is that the definition of “court” has beenamended with respect to international commercial arbitration and the term “court”in that scenario shall mean the High Court of competent jurisdiction.2. A proviso hasbeen added to Section 2(2) which envisages that Sections 9, 27, 37(1) (a),37(3) shall also be applicable to international commercial arbitrations, thoughthe place of arbitration is outside the boundaries of India, unless there isany agreement to the contrary.
3. If any actionbrought before the judicial authority having the subject matter of arbitrationagreement, Section 8 mandates the judicial authority to refer the parties toarbitration. Section 8(1) has been amended stating that notwithstanding anyjudgment, decree or order of the Supreme Court or any other Court, the judicialauthority shall refer the parties to the arbitration unless it finds that primafacie no valid arbitration agreement exists. Section 8 (2) has also beenamended envisaging that if there exists no original arbitration agreement withthe party applying for the reference, then such party shall also file anapplication for production of the same.4.
Amendment toSection 9 says that if any interim measures are passed by the Court before thecommencement of arbitral proceedings, in such a case the arbitral proceedingsare bound to start within a period of 90 days from the date on which the orderis passed or within such a time prescribed by the Court. It also empowers theHigh Court to fix the rules regarding fees of the arbitral tribunal, inaccordance with fourth schedule. 5. If there existsany interest of relationship that would raise justifiable doubts concerning theproposed arbitrator’s neutrality, that should be disclosed by him in writing asper Section 12 of the Act. By the amendment fifth schedule has been added tothe Act that contains certain grounds which shall guide in determining whetherthere are any circumstances which may give rise to justifiable doubts regardingthe impartiality or the independence of the arbitrator. 6. As per Section 17, even the Tribunal is empoweredto grant any kind of interim measures as if the Court is empowered to grantunder Section 9 and these measures shall be enforceable in the same manner asan order of the Court. 7.
The Respondentcan submit the counterclaim or plead a set-off as per an amendment to Section23. 8. Section 29A isadded to the Act which imposes 12 months’ time restriction on the Tribunal tomake its award, along with incentives if the award is rendered in 6 months bythe Tribunal.
This 12 month time period can be extended by the partiesconsensually up to a period of 6 months, but this can only be extended by theCourt if there is any sufficient cause. 9. Section 29B hasalso been inserted by this amendment so as to make rules regarding the fasttrack procedure for dispute resolution. The awards shall be given only within 6months if the parties to the arbitral proceedings accept for the same. 10.
Section 31(7) (b)which prescribes the rate of interest has been amended. The sum which is to bepaid under the award shall carry a rate of interest 2% higher than the currentrate of interest, unless the award otherwise directs. 11. As per anamendment to Section 34, an award passed in an international arbitration canonly be set aside if it is against the public policy of India and only if theaward is induced by either fraud or corruption, it is in contravention with thefundamental policy of Indian Law, or it is in conflict with basic concepts of moralityor justice.
12. Filing of anapplication under Section 34 in order to set aside an award will notautomatically stay the execution of the award. It can only be stayed if theCourt passes a specific order to that effect as per amended Section 36. 13. Section 37 ofthe Act has been amended to provide for the possibility of an appeal from anyorder of a judicial authority that has refused to refer parties to arbitrationunder Section 8 of the Act.
CONCLUSIONIt has been clear by the above thesis that with theadvent of Section 89 of the Code, numerous changes have been taken place in theADR practices in India. This section was added to the Code with an objective toreduce the burden of the ordinary Courts and to provide for cheaper andexpeditious settlement of disputes between the parties and meet the ends ofjustice. ADR mechanisms are really a good supplementary to the Courts toresolve the disputes amicably without any intervention of Courts and with theconsent of the parties to the dispute.