CHALLENGES IN INTRODUCING ADR SYSTEM IN INDIA

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)

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TABLE OF CONTENTS 

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

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

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

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

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

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

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

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

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

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

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

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

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

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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 ―Challenges in introducing ADR system in India‖ 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)

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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

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LIST OF CASES

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

Hooters of America v. Phillips, U.S. 4th Circuit Court of Appeals, CA-963360-4-22, 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

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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.

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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 1

example of such out of court dispute resolution. The practice is still prevalent in villages even today where senior villagers sits and resolve disputes of fellow villagers. vil lagers. 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  2

in 1840 . 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  3

the villagers by sitting together and mediating the problems faced by the two parties. 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 4

exclusive to big concerns. 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 t he People ‖,

Government of India, Ministry of Law, Justice Justice and Company Affairs, 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  – Social Justice” , Ministry of Law, Justice

and Company Affairs, 1977 Report

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The reason as to why such a phenomenon is witnessed in our country is very interestin g. 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 5

exclusive and high end service. 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.

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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.

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7

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

Conference on ‗ Institutional  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

st

Hernando de Soto, The Other Path, 1 ed., Harper & Row (1989)

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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., 8

never went to adopt the Model Law, India adopted it fully. 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.  –  there would be chaos. Whenever there is chaos and confusion, The result was predictable  – there 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 t he situation. As the situation was unclear as to what would happen with the new sections in the new law, how the courts would erent words and phrases, the business community‘s anxiety grew with each interpret diff erent 9

passing day. 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.

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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 1 0th 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

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―Court‖

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 t ime 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.

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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.

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

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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

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

XLI/No.1 at p 8

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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, arbitr ators, 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,

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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 t hird 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 t o 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

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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 i n cases like 15

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

indicate that the Act limits intervention of the Court wit h 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 Case

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17 

and SBP & Co Case . 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 c onflict 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 18

Act was put in place to avoid . 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 b y

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

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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 19

equally insistent clamour to end litigation) in adjudication today . The expansion 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 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 t erms of contract since ONGC gave license for interference in such grounds. This indeed sets a dangerous precedent since, as stated earlier; t he 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 Case

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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 tri bunal's award should be final. But they agreed this on the basis that the arbitration p rocedure 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 m y 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

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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  22

arbitration especially in the field of business relationships.

The arbitrators do not understand how things are done i n 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 ta ke 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 customs and attitudes. It is not predisposed standpoints regarding each other‘s cultures, customs 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.

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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

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

10(2), 2007, pp. 33-37 23

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

accessed at www.McNairChambers.com, 29 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 24

translated. 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. done.

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

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

Forum on ODR 2003

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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 –  important  – arbitration arbitration has not been as efficacious as it should s hould have been.

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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 welltrained 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, l itigation, 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 —  stakeholders  — the 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  26

arbitration.

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 Perspectives ” , SCR , 2008

26

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

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

203

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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 i t 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

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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.

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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‘ 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 t he 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.

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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‘ Arbitration‘, ICA’ s Arbitration Quarterly, ICA, 2006, vol.

XLI/No.1, p. 29

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LACK OF ADEQUATE POLITICAL SUPPORT

India follows the doctrine of separation of powers. The three organs –  organs  – Legislature, Legislature, Executive and Judiciary –  Judiciary – work work independently, however, there is definite overlap between the fi rst 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 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 i ntroduced 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 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.

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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 i n 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. 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

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Commission made various recommendations 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 Wit h 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 L aw 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.

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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 i ntroduced 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 t he 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 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.

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

http://rajyasabha.nic.in/bills-ls-rs/arch2003.htm, http://rajyasabha.nic.in/bills-ls-rs/arch2003.htm, accessed on 20 August, 2010

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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 Government must act strictly and should first of all adopt 176

th

Law Commission‘ 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 i n 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 t his 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‘ today‘s India needs to take the ADR mechanisms seriously. 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 t he 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.

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BIBLIOGRAPHY

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

2. Avatar Singh, Law of Arbitration Arbit ration 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