Alternative Dispute Resolution Project
Procedures of Alternative Dispute Resolution
Compiled By Ankit Chowdhri 10/09
Contents
List of Abbreviations
i
Table of Cases
iii
Alternative Dispute Resolution: An Introduction
1
Malimath Committee on Arrears in Court
1
Development Development of Alternative Dispute Resolution
2
Arbitration
3
Features of Arbitration
5
Ad Hoc & Institutional Arbitration in Brief
8
Conciliation Features of Conciliation Mediation Restrictions on Mediator
9 9 15 17
Negotiation
18
Bibliography
21
List of Abbreviations
&
and
ADR
Alternative Dispute Resolution
AIR
All India Reporter
All.
Indian Law Reports, Allahabad Series
Andhra
Indian Law Reports, Andhra Series
Bom.
Indian Law Reports, Bombay Series
CPC
Code of Civil Procedure, 1908
Cut. LT
Cuttack Law Times
DB
Division Bench
Del.
Indian Law Reports, Delhi Series
DLT
Delhi Law Times
Ed.
Edition
Gau.
Indian Law Reports, Guwahati Series
Ibid.
Ibidem
ICA
Indian Council of Arbitration
ICADR
International Centre for Alternative Dispute Resolution
ICC
International Chamber of Commerce
ICJ
International Court of Juctice
ILR
International Law Reporter
Lah.
Indian Law Reports, Lahore Series i
LJ Ch.
Law Journal Reports Chancery
Ltd.
Limited
Mad.
Indian Law Reports, Madras Series
p.
Page Number
Pat.
Indian Law Reports, Patna Series
QB
Queen’s Bench
Raj.
Indian Law Reports, Rajasthan Series
SC
Supreme Court of India
SCC
Supreme Court Cases
U.S.A.
The United States of America
v.
versus
Vol.
Volume
ii
Table of Cases
ABB ABL Ltd. v. Cement Corp. of India Collins v. Collin
…………………………………………………7
…………………………………………………………………………3
Deo Narain Singh v. Siabir Singh
…………………………………………………………8
Fertilizer Corporation of India Ltd. v. IDI Management Fisheries Jurisdiction Case
…………………………………8
………………………………………………………………..19
Guru Nanak Foundation v. Rattan Singh & Sons
………………………………………..17
Haresh Daya Ram Thakur v. State of Maharashtra & Others
……………………10, 12
Indurthi Venkata Srinivasa Rao v. Indurthi Narasimha Rao
…………………………8
J. Kaikobad v. F. Khambatta
…………………………………………………………7
Johara Bibi v. Mohammad Sadak Thambi Marakayur Madan Lal v. Nabi Baksh
…………………………………………………………………7
Mysore Cements Ltd. v. Svedala Barmac Ltd.
………………………………………..13
Northern Regional Health Authority v. Derek Crouch Raipur Development Authority v. Chokhamal Contractors
Ram Singh v. G.A. Cooperative Service Society Reshma Constructions v. State of Goa
…………………………………4 ………………………..17
……………………………………….18
…………………………………………………8
State of Jammu & Kashmir v, Deo Dutt Pandit State of Punjab v. Dina Nath
…………………………………8
…………………………………………5
…………………………………………………………5
State of West Bengal v. Amritlal Chatterjee
………………………………………..10
iii
…………………………………………4
Tarapore and Co. v. Cochin Shipyard Ltd.
Tata Iron and Steel Co. Ltd. v. Union of India and Others Union of India v. M/s Jagat Ram
………………………..13
………………………………………………………..18
Unit Officer, NPCC Ltd. v. Madhusudan Dev Berma UP Ban Nigam v. Bishan Nath Goswami
…………………………………7
………………………………………………..11
Vice-Chairman, Bhubaneswar Development Authority v. Pyari Mohan Mohanty
…5
iv
Alternative Dispute Resolution An Introduction The Oxford Dictionary of Law defines Alternative Dispute Resolution as “any of the variety of techniques for resolving civil disputes without the need for conventional litigation. It may include mini-trial (a shortened and simplified form of court hearing), informal methods of arbitration, and structured forms of conciliation using specially trained mediator acting as a go- between.”
1
Malimath Committee on Arrears in Court Delay in administration of justice is not confined to India alone; it has rather become a global phenomenon. As Chief Justice Warren Burger of the U.S.A. Supreme Court once observed, “we are moving towards a time when it will be impossible for the Courts to cope up with the dockets and if something is not done, the result will be disastrous which none of us would want to see.” In India, the situation is all the more worse. The Indian Judicial System has been stretched almost to a breaking point ri ght from the Apex Court to the lowest Subordinate Subordinate Courts. The Malimath Committee which is also known as the ‘Arrears Committee,’ undertook a comprehensive review of the working of the Court system, particularly, all aspects of arrears and Law’s delay and made various useful 2
recommendations for reducing litigation and making justice readily accessible to the people at the minimum cost of time and money.
3
The Malimath Committee underlined the need for alternative disputes resolution mechanism such as mediation, conciliation, arbitration, Lok Adalats etc., as a viable alternative to the conventional Court litigation. These alternative adjudicatory techniques would not only provide cheap and speedy justice to the needy persons but would go a long way in restoring the confidence of the people and establishing Rule of Law as contemplated by the Constitution of India.
1
4
th
A Dictionary of Law, Oxford University Press, New York, 5 Ed., 2003, p. 24. 2 Report of the Malimath Committee (1989- 90). The Committee was headed by Hon’ble Mr. Justice V.S. Malimath, the two other members being Hon’ble Mr. Justice P.D. Desai and Hon’ble Dr. Justice A.S. Anand. 3 rd Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3 . Ed., Central Law Agency, Allahabad 2006, p. 264. 4 Ibid.
Page | 1
The causes of ‘our judicial system creaking under the weight of arrears’
5
may be
manifold. The limitation of space does not permit their mention t this place. But the hard truth remains that the people are disgusted with the existing justice delivery system and are at times compelled to resort to extra judicial delivery system and are at times compelled to resort to extra judicial remedies which lead to erosion of legal values and weakens the foundation of democracy.
6
Development of Alternative Dispute Resolution Courts are overburdened by arrears appearing to be insoluble in the near future, and most of the cases become infructuous. The cases are increasing in Courts in at mindboggling speeds and the problem is further compounded when there is lack of discipline in the litigation process and the judicial mechanism finds it difficult to cope with the enormous 7
caseload. Hence, the Alternative Dispute Resolution has received a good welcome in every field. A resolution had been adopted by adopted by Chief Minister and the Chief Justice of th
High Courts on 4 December, 1993, declaring that the Courts were not in a position to bear the entire burden of justice system and that a number of disputes stooped themselves to resolution by alternative modes like arbitration, conciliation, mediation and negotiation.
8
The
Alternative Dispute Resolution procedures impart procedural flexibility in order to save time and money. The then Prime Minister of India, Mr. Narsimha Rao, inaugurating the International th
Centre for Alternative Disputes Resolution (ICADR), on 6 October, 1995, observed:
9
“While reforms in the judicial sector should be undertaken with necessary speed, it does not appear that the courts and tribunals will be able to bear the entire burden of the justice system. It is incumbent on Government to provide at reasonable cost as variety of disputes that arise. Litigants should be encouraged to resort to alternative dispute resolution so that the Court system proper would be left with a number of smaller numbers of important disputes that demand judicial attention.”
5
Hon’ble Mr. Justice P.N. Bhagwati’s observation in his speech on Law Day, November 26, 1985. See Supra 4. 7 rd See Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3 . Ed., Central Law Agency, Allahabad 2006, p. 263. 8 th Tiwari, O.P.; Arbitration and Conciliation Act 1996 with ADR, 5 Ed., Allahabad Law Agency, Faridabad, 2008, p. 362. 9 Ibid. 6
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As a result a number of modes were developed to ease the Courts of the burden. The most prevalent modes of Alternative Dispute Resolution have been discussed in this compilation.
Arbitration As commonly understood, arbitration means settling of disputes between two or more persons or groups by some neutral person who is acceptable to all concerned. Such person is known as an arbitrator who upon his appointment as such is obliged to help the parties involved in a dispute or disagreement to find grounds for agreement and to submit or settle by arbitration. The word ‘arbitration’ has its origin in Lati n word Arbitrari, which means to give a judgement.
10
Arbitration is a reference to the decision of one or more persons, either with or without an umpire, of some natter or matters in difference between the parties.
11
12
In the Halsbury’s Laws of England the term ‘arbitration’ has been defined as under: “The term ‘arbitration’ is used in several senses. It may refer either to a judicial process or to a non-judicial process. A judicial process is concerned with the ascertainment, declaration and enforcement of rights and liabilities as they exist, in accordance with some recognised system of law. An industrial arbitration may well have its function to ascertain and declare, but not to enforce, what in the arbitrator’s opinion ought to be the respective righ ts and liabilities of the parties, and such a function is non-judicial. Conciliation is a process of persuading parties to reach an agreement, and is plainly not arbitration; nor is the chairman of the conciliation board an arbitrator.” With the ever widening expansion of international trade and commerce, complex questions on private international law, effect of local laws on contract between parties belonging to different nations are certain to crop up. Arbitration has been considered to be a civilised way of resolving disputes avoiding court proceedings. This approach manifests faith of the parties in the capacity of the tribunal of their choice to decide even a pure
10
th
Basu, N.D.; Law of Arbitration and Conciliation, Vol. 1, 11 Ed., Orient Publishing Company, New Delhi, 2010, p. 1. 11 Collins v. Collins, 28 LJ Ch. 186. 12 th 4 Ed., Vol. 2, paragraph 502.
Page | 3
question of law.
13
Is has long been a principle of law that disputes affecting civil rights, in
which only damages are claimed, may be referred to arbitration.
14 15
Sir John Donaldson in Northern Regional Health Authority v. Derek Crouch stated:
“Arbitration is usually no more and no less than litigation in private sector. The arbitrator is called upon to find the facts, apply the law and grant relief to one or other or both of the parties.” Arbitration is entered into usually by contract, but renders a binding result. Arbitrators are selected by parties who bear the expenses of arbitral proceedings as also the fees payable to arbitrators. Arbitration though less formal than litigation, is the most formal ‘ award’’ which is similar to a final decree of a of the other ADR ADR processes and results in an ‘award 16
Court.
The arbitral proceedings are deemed to have commenced with the sending of a notice of arbitration by the claimant to the respondent and such notice is received by the respondent. The notice is deemed to have been received on the day it was delivered in accordance with the provisions of Section 3 (2) of the Arbitration and Conciliation Act, 1996.
17
An arbitration clause in the contract between the parties excludes intervention of
the law Courts to decide the case on merits. The decision of the arbitral tribunal is final and binding on the parties.
18
Even a challenge to the validity of an award made by the arbitral 19
tribunal or its jurisdiction has to be referred to the tribunal itself and not the law Court.
Arbitration as an alternative dispute resolution technique has received statutory recognition by the Arbitration and Conciliation Act, 1996 which has repealed the earlier Arbitration Act, 1940. The provisions relating to domestic arbitration are contained in Part I of the Act 1 while Part II deals with the finality and enforceabilities of the foreign I award.
20
13
Tarapore and Co. v. Cochin Cochin Shipyard Ltd., AIR 1984 SC 1072; 1985 Arb. LR ; (1984)2 SCC 680. th th Russell on Arbitration, 20 Ed., p. 22. Cited i n Markanda, P.C.; Law Relating to Arbitration & Conciliation, 6 Ed., Wadhwa & Company Nagpur, 2006, p. 27. 15 (1984) QB 644 (CA). 16 Dr. A.M. Singhvi, Justice Delayed is Justice Denied. Blue Print for Reform, All India Seminar Papers on Judicial Reforms (1998) p. 41. Cited in Paranjape, Dr. N.V., Arbitration and Alternative Dispute Resolution, Central Law rd Agency, Allahabad, 3 Ed., 2006, p. 269. 17 See Section 3 (2) of the Arbitration & Conciliation Act, 1996. 18 See Section 35 of the Arbitration and Conciliation Act, 1996. 19 See Section 33 of the Arbitration and Conciliation Act, 1996. 20 rd Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3 . Ed., Central Law Agency, Allahabad 2006, p. 269. 14
Page | 4
Features of Arbitration Arbitration has been explained hereunder under points highlighting various essentials of the procedure while also highlighting the corresponding statutory provision. 1.
Alternate dispute redressal by arbitration Arbitration is considered to be an important alternative dispute redressal process
which is to be encouraged because of high pendency of cases in the Courts and cost of litigation. Arbitration has to be looked up to with all earnestness as that the litigant has faith in the speedy process of resolving thereto dispute.
21
But the parties are not allowed to initiate during the reconciliation proceedings, any arbitral or judicial proceedings in respect of a dispute which is the subject-matter of conciliation proceedings except that a party may initiate arbitral or judicial proceedings where in his opinion such proceedings are necessary necessary for preserving his rights. 2.
22
Agreement of parties to submit to arbitration Parties may agree to submit to arbitration all or certain disputes which have arisen or
which may arise between them in respect of a defined legal relationship, whether contractual or not.
23
An arbitrative agreement may be in the form of an arbitration clause in a contract or
in the form of a separate agreement.
24
The essentials of arbitration agreement include:
25
(a) There should be an agreement; (b) Agreement should be in writing;
26
(c) Agreement should be to refer either a present or future dispute for arbitration. — (a) a An arbitration agreement should be in writing which may be contained in in — document signed by the parties; (b) an exchange of letters, telex, telegrams or other mentis of telecommunication which provide a record of the agreement; or (c) an exchange of statement
21
State of Jammu & Kashmir v, Deo Dutt Pandit , AIR 1999 SC 3196; 1999 (7) SCC 339. See Section 77 of the Arbitration & Conciliation Act, 1996. 23 See Section 7(1) of the Arbitration & Conciliation Act, 1996. 24 See Section 7(2) of the Arbitration & Conciliation Act, 1996. 25 Vice-Chairman, Vice-Chairman, Bhubaneswar Development Authority v. Pyari Mohan Mohanty , (1987) 63 Cut. LT 402. 26 State of Punjab v. Dina Nath, AIR 2007 SC 2157, 2159. 22
Page | 5
of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other. 3.
27
28
Obligation of judicial authority & commencement commencement of arbitration.
A judicial authority before which an action is brought in a matter which is subject to an arbitration agreement shall, if a party so applies not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration.
29
Such application
should be accompanied by the original arbitration agreement or a duly certified copy of it.
30
Notwithstanding that such an application has been made and that the issue is pending before the judicial authority, arbitration may be commenced or contemned and an arbitral award may be made. 4.
31
Equal treatment of parties The arbitration proceedings also the parties are to be treated with equality and each
party has to be given full opportunity to present his case. proper hearing should include:
32
The minimum requirement of
33
(a) Each party must have notice that the hearing is to take place and of the date, time and place of holding such hearing; (b) Each party party must have have
a reasonable reasonable opportunity opportunity to be present throughout throughout the
hearing; (c) Each party must have a reasonable opportunity to present statements, documents, evidence and arguments in support of his own case; (d) Each party must be supplied with the statements, documents and evidence adducted by the other side; (e) Each party must have a reasonable opportunity to cross- examine his opponent’s witness and reply to the arguments advanced in support of the opponent’s case. 27
34
th
See Tiwari, O.P.; Arbitration and Conciliation Act 1996 with ADR, 5 Ed., Allahabad Law Agency, Faridabad, 2008, p. 372. 28 See Section 7(3) & (4) of the Arbitration & Conciliation Act, 1996. 29 See Section 8(1) of the Arbitration & Conciliation Act, 1996. 30 See Section 8(2) of the Arbitration & Conciliation Act, 1996. 31 See Section 8(3) of the Arbitration & Conciliation Act, 1996. 32 See Section 18 of the Arbitration & Conciliation Act, 1996. 33 th Markanda, P.C.; Law Relating to Arbitration & Conciliation, 6 Ed., Wadhwa & Company Nagpur, 2006, p. 406. 34 See similar suggestions by Mustill & Boyd, Law and Practice of Commercial Arbitration in England, 1982 Ed., p. 261.
Page | 6
5.
Civil Procedure and Limitation rules not binding The Arbitral Tribunal also is not bound by the Code of Civil Procedure, 1908
Indian Evidence Act, 1872.
36
35
the
The parties are free subject to the provisions as to conduct of
arbitral proceedings, to agree on the procedure to be followed by the arbitral tribunal in conducting its proceedings.
37
There is no rule of law that an arbitrator must decide all the
issues framed in the suit expressly as long as the whole suit is decided by him. He is not bound by any rules of procedure or those of evidence, and it is not open to the parties to pick holes in the decision by the tribunal of their own choice. 6.
38
Commencement Commencement of arbitral proceedings Unless otherwise agreed by the parties, the arbitral proceedings in respect of a
particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.
39
A perusal of this provision would make it
abundantly clear that it is not necessary that the request should be made expressly in writing. Request could be made by conduct of the parties and it has to be understood in that manner. Had it been essential that request should be made in writing to the petitioner, then the word “written” should have found place in this section before the word “request”. 7.
40
Decision making by panel of arbitrators Unless otherwise agreed by the parties, in arbitral proceedings with more than one
arbitrator, any decision of the arbitral tribunal shall be made by a member or all its members. If authorized by the parties or all the members of the arbitral tribunal, questions of procedure may be decided by the presiding arbitrator.
41
The provision says that the opinion of majority
shall prevail. The majority is a term signifying greater number. This sub section
42
is based on
the theory of numbers. It requires counting of heads. If there are three arbitrators, two will
35
Unit Officer, NPCC Ltd. v. Madhusudan Dev Berma, AIR 1979 Gau. 64 (DB). See Section 19(1) of the Arbitration & Conciliation Act, 1996. Also See J. Kaikobad v. F. Khambatta, AIR 1930 Lah. 280 (DB). 37 See Section 19(2) of the Arbitration & Conciliation Act, 1996. 38 Madan Lal v. Nabi Baksh, AIR 1947 Lah. 177. 39 See Section 21 of the Arbitration & Conciliation Act, 1996. 40 ABB ABL Ltd. v. Cement Corp. of India, 1999 (3) Raj. 243. 41 See Section 29(1) & (2) of the Arbitration & Conciliation Act, 1996. 42 Ibid. 36
Page | 7
have the deciding voice because they constitute the majority. The award with which the law is concerned is the award of the majority. 8.
43
Settlement An arbitral tribunal has to encourage settlement of the dispute and, with wit h the agreement
of the parties, the arbitral tribunal may use mediation, conciliation or other procedure at any time during the arbitral proceedings to encourage settlement.
44
If during arbitral proceedings,
the parties settle the dispute, the arbitral tribunal shall terminate the proceedings and, if requested by the parties and not objected to by the arbitral tribunal record the settlement in the form of an arbitral award on agreed terms.
45
An arbitral award shall be made in writing and shall be si gned by the members of the arbitral 46
tribunal.
The arbitral award shall state the reasons upon which it is based unless — unless —
the parties have agreed that no reasons are to be given; or
the award is an arbitral award on agreed terms of the parties.
47
The arbitral award shall state its date and the place of arbitration as determined in accordance accordance with Section 20 (place of arbitration) and the award shall be deemed to have been made at that place;
48
arbitral award is made, a signed copy of it shall be delivered to each party.
other words, receipt of signed copy arbitration proceeding.
50
49
In
of the arbitral award is an important event in the
51
Ad Hoc & Institutional Arbitration: In Brief Arbitration may either be ‘Ad ‘Ad hoc’ ‘ institutional’’. In Ad hoc arbitration, hoc’ or it may be ‘institutional the parties jointly select the arbitrator(s) and work out details of the procedure together with the arbitral tribunal when the dispute arises. The Arbitral Tribunal may also devise its own 43
Fertilizer Corporation of India Ltd. v. IDI Management , AIR 1984 Del. 333; (1984) 26 DLT 149 (DB). See Section 30(1) of the Arbitration & Conciliation Act, 1996. 45 See Section 30(2) of the Arbitration & Conciliation Act, 1996. 46 See Section 31(1) of the Arbitration & Conciliation Act, 1996. 47 See Section 31(3) of the Arbitration & Conciliation Act, 1996. 48 See Section 31(4) of the Arbitration & Conciliation Act, 1996. 49 Ibid. 50 The award must be signed by the arbitrators. Johara Bibi v. Mohammad Sadak Thambi Marakayur , AIR 1951 Mad. 997 (DB); Deo Narain Singh v. Siabir Singh, AIR 1952 Pat. 461. 51 Reshma Constructions v. State of Goa, 2000 (1) RAJ 552 (B om). Indurthi Venkata Srinivasa Rao v. Indurthi Narasimha Rao, AIR 1963 AP 193. 44
Page | 8
procedure. But when parties agree to employ the services of an arbitration institution, it is termed as institutional arbitration.
52
These institutions have framed their own Rules of
arbitration. It has been generally accepted that institutional arbitration has many advantages as against the Ad hoc arbitration. Since institutional arbitration is conducted according to its own set rules and procedure, and supervised by professionally trained staff, it reduces the risks of procedural breakdowns, particularly of the commencing of the arbitral powers, and of the possibility of technical defects in the arbitral award. Though Ad hoc is more flexible, f lexible, less expensive and more confidential than the institutional arbitration; the trend is to prefer institutional arbitration because of its certainty, efficacy and international recognition.
Conciliation 53
In the Halsbury’s Laws of England ,
the term Conciliation has been defined as “a 54
process of persuading parties parties to reach agreement.”
st According to the Chambers 21 Century Dictionary, the word ‘conciliate’ means to
win over someone; to overcome the hostility of someone; to reconcile (people in dispute), 55
etc.
The provisions of Part III of the Act shall apply to conciliation if disputes which had been pending before the arbitral tribunal and such disputes must be those which had arisen between the parties out of legal relationship, whether contractual or not, and to all proceedings relating thereto. However, the provisions of Part III of the Act shall have no application if there is any specific prohibition in any other law for the time being in force or the parties have otherwise agreed to expressly exclude conciliation.
56
Features of Conciliation 1. Application and scope of conciliation.
52
The Service if the Indian Council of Arbitration (ICA); the International Chamber of Commerce (ICC) are generally utilized for Institutional Arbitration. 53 th 4 Ed., Vol. 2, Paragraph 502. 54 See Supra 12. 55 Sethi, Justice R.P.; Commentary on Law of Arbitration & Conciliation, Vol. 2, Ashoka Law House, New Delhi, 2007, p. 964. 56 th Markanda, P.C.; Law Relating to Arbitration & Conciliation, 6 Ed., Wadhwa & Company Nagpur, 2006, p. 848.
Page | 9
By way of conciliation a dispute may be settled without litigation out of Court. The decision is arrived at by the parties themselves through the assistance of a sole-conciliator or conciliator appointed by the parties separately along with a third conciliator to be appointed by the consent of both the parties.
57
Under Section 62 of the Act, the party initiating conciliation has to send to the other party a written invitation to conciliate, briefly, identifying the subject of the dispute.
58
On
receipt of invitation for conciliation, the other party has a choice either to accept or to reject the offer. If it is the former, then the conciliation proceedings shall be deemed to have commenced with the other party confirms in writing its willingness to agree to the said 59
proposal.
It is submitted that any oral acceptance of an offer of conciliation shall not be
considered sufficient under the provisions of this section. invitation, there will be no conciliation proceedings.
61
60
If the other party rejects the
If the party initiating conciliation does
not receive a reply within thirty days from the date on which he sends the invitation, or within such other period of time as specified in the invitation, he may elect to t reat this as a rejection of the invitation to conciliate and if he so elects, he shall inform in writing the other party 62
accordingly.
2. Procedure to alternate conciliation and dispute settlement. In Section 64, provision is made that the appointment of conciliators shall be by agreement of parties or if the parties agree they may request a suitable institution or a person to appoint a conciliator on their behalf.
63
The parties may enlist the assistance of a suitable
institution or person in connection with the appointment of conciliators, and particularly, — particularly, — (a) a party may request such an institution or person to recommend the names of suitable individuals to act as conciliator, or (b) the parties may agree that the appointment of one or more conciliators be made directly by such institution or person.
64
But in recommending or
appointing individuals to act as conciliator, the institution or person shall have regard to such considerations as are likely to secure the appointment of an independent and impartial 57
Also See Harish Daya Ran Thakur v. State of Maharashtra & Others, 2000 (6) SCC 179; AIR 2000 SC 2281. See Section 62(1) of the Arbitration & Conciliation Act, 1996. 59 See Section 62(2) of the Arbitration & Conciliation Act, 1996. Also see State of West Bengal v. Amritlal Chatterjee, 2003 (10) SCC 527; AIR 2000 SC 1295. 60 th Markanda, P.C.; Law Relating to Arbitration & Conciliation, 6 Ed., Wadhwa & Company Nagpur, 2006, p. 850. 61 See Section 62(3) of the Arbitration & Conciliation Act, 1996. 62 See Section 62(4) of the Arbitration & Conciliation Act, 1996. 63 Harish Daya Ram Thakur v. State of Maharashtra & Others, 2000 (6) SCC 179; AIR 2000 SC 2281. 64 See Section 64(2) of the Arbitration & Conciliation Act, 1996. 58
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conciliator and, with respect to a sole or third conciliator, shall take into account the advisability of appointing a conciliator of a nationality other than the nationalities of the 65
parties.
When a conciliator is appointed, each party has to submit to the conciliator a brief within statement describing the general nature of the dispute and the points at issue, and copy of such statement has to be served on the other party.
66
The conciliator may ask each party to
submit a further written statement to him, supplemented by any document and other evidence and grounds in support thereof. He may ask for further additional information as he deems 67
fit.
The provisions of C.P.C. or Evidence Act do not bind the conciliator.
68
He may for facilitating the conduct of the conciliation proceedings, arrange administrative assistance by a suitable institution or person. But for such act, he has to obtain consent of the parties.
69
He may invite the parties to meet him or may communicate with them orally or in writing. He may meet or communicate with the parties together or with each of them 70
separately.
Unless the parties have agreed upon the place where meetings with the
conciliator are to be held, such place shall be determined by b y the conciliator, after consultation with the parties having regard to the circumstances of the conciliation proceedings.
71
Where
there is no condition in the agreement empowering the arbitrator (or conciliator) to fix the venue of the arbitration (conciliation) hearing as he thought fir, the arbitrator (or conciliator) in fixing the venue of the meeting must take into account the material circumstances, including the residence of the parties and their witnesses, the subject matter of the reference and the balance of convenience. convenience.
72
When the conciliator receives factual information concerning the dispute from a party, he shall disclose the substance of that information to the other party in order that the other party may have the opportunity to present any explanation which he considers appropriate.
73
65
See Proviso to Section 64(2) of the Arbitration & Conciliation Act, 1996. See also Sethi, Justice R.P.; Commentary on Law of Arbitration & Conciliation, Vol. 2, Ashoka Law House, New Delhi, 2007, p. 972. 66 See Section 65(1) of the Arbitration & Conciliation Act, 1996. 67 See Section 65(2) & (3) of the Arbitration & Conciliation Act, 1996. 68 See Section 66 of the Arbitration & Conciliation Act, 1996. 69 See Section 68 of the Arbitration & Conciliation Act, 1996. 70 See Section 69(1) of the Arbitration & Conciliation Act, 1996. 71 Ibid. 72 UP Ban Nigam v. Bishan Nath Goswami , AIR 1985 All. 351. 73 See Section 70(1) of the Arbitration & Conciliation Act, 1996.
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But when a party gives any information to the conciliator subject to a specific condition that it be kept confidential, the conciliator shall not disclose that information to the other party. The Apex Court observed
75
74
that “In Section 70 provision is made regarding disclosure of
information therein it is provided, inter-alia, that when the conciliator receives factual information concerning the dispute form a party, he shall disclose the substance of that information to the other party party in order party have the opportunity to present any explanation which he considers appropriate. In the proviso to the Section it is stated that when a party gives any information to the conciliator subject to a specific condition that it be kept confidential, the conciliator shall not disclose that tha t information to the other party.” The parties shall in good faith co-operate with the conciliator and in particular, they shall endeavour to comply with the requests made by the conciliator to submit written materials, they shall provide evidence and attend the meetings before the conciliator.
76
Each party may on his own initiative or at the invitation of the conciliator, submit to him the suggestions for settlement of the dispute.
77
3. Status and effect of settlement agreement. When it appears to the conciliator that there exist elements of a settlement which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observation of the parties, the conciliator may reformulate the terms of a possible settlement in the light of such 78
observations. If the parties reach an agreement or a settlement of the dispute, they may draw up and sign a written settlement agreement. If requested by the parties, the conciliator may draw up the settlement agreement.
79
When the parties sign the settlement agreement, it shall
be final and binding on the parties and persons claiming under them respectively.
80
The
conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of the parties.
81
74
See Proviso to Section 70 of the Arbitration & Conciliation Act, 1996. Harish Daya Ram Thakur v. State of Maharashtra and Others, 2000 (6) SCC 179; AIR 200 SC 2281. 76 See Section 71 of the Arbitration & Conciliation Act, 1996. 77 See Section 72 of the Arbitration & Conciliation Act, 1996. 78 See Section 73(1) of the Arbitration & Conciliation Act, 1996. 79 See Section 73(2) of the Arbitration & Conciliation Act, 1996. 80 See Section 73(3) of the Arbitration & Conciliation Act, 1996. Also see Haresh Daya Ram Thakur v. State of Maharashtra and Others, AIR 2000 SC 2281. 81 See Section 73(4) of the Arbitration & Conciliation Act, 1996. 75
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The settlement agreement shall have the same status and effect as if it is an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under Section 30 of the Arbitration & Conciliation Act, 1996.
82
It is only that agreement agreement which has been been arrived at in conformity with the manner manner stipulated and form envisaged and got duly authenticated in accordance with this section, alone can be assigned the status of a settlement agreement within the meaning if and for effective purpose of the Act and not otherwise.
83
4. Principle of fairness and justice to be followed.
84
Doctrine of ‘fairness’ and the duty to act fairly is a doctrine developed in the administrative law field to ensure the rule of law and to prevent failure of justice. It is a principle of good conscience and equity since the law courts are to act fairly and reasonably in accordance with the law.
85
The conciliator is obliged to be guided by the principle of
fairness and justice objectively. He has to keep in consideration the rights and obligations of the parties besides other things. He has to take into consideration the usages of the concerned trade and surrounding circumstances of the case-dispute and the .previous business practices in use between the parties. The conciliator has to assist the parties in an independent and impartial manner to reach at an amicable settlement.
86
He is to be guided by principles of
objectivity, fairness and justice. He has to consider the rights and obligations of the parties. He has to keep in mind the usages of the trade concerned and the circumstances surrounding the dispute, including any previous business practices between the parties.
87
He may conduct
the proceedings in such a way as he thinks appropriate. He has to take into account the circumstances of the case, the wishes of the parties. At the request of a party, he may hear oral statements due to need of speedy settlement of the dispute.
88
He may make his proposals
for settlement of a dispute at any stage of the proceedings. Such proposals need not be in writing or to accompany reasons reasons for the settlement.
89
82
See Section 74 of the Arbitration & Conciliation Act, 1996. Mysore Cements Ltd. v. Svedala Barmac Ltd., AIR 2003 SC 2494; (2003) 10 SCC 375. 84 See Section 67 of the Arbitration & Conciliation Act, 1996. 85 Tata Iron and Steel Co. Ltd. v. Union of India and Others, 2001 (2) SCC 41; AIR 2000 (SC) 3706. 86 See Section 67(1) of the Arbitration & Conciliation Act, 1996. 87 See Section 67(2) of the Arbitration & Conciliation Act, 1996. 88 See Section 67(3) of the Arbitration & Conciliation Act, 1996. 89 See Section 67(4) of the Arbitration & Conciliation Act, 1996. 83
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5. Confidentiality of the information, etc. to be kept in conciliation procedure.
90
Without any consideration to anything contained in any other law otherwise, the conciliator and the parties are obliged to keep confidential all matters relating to the conciliation proceedings. This confidentiality provision shall be applicable also to the settlement, agreement, except where the disclosure is necessary for the purposes of the implementation and enforcement of the settlement agreement arrived at and authenticated by the conciliation. 91
6. Termination of conciliation proceedings.
The conciliation proceedings shall be terminated — o
by the signing of the settlement agreement by the parties on the date of the agreement; or
o
by a written declaration of the conciliator, after consultation with the parties to the effect that further efforts at conciliation are no longer justified, on the date of the declaration; or
o
by a written declaration of the parties addressed to the conciliator to the effect that the conciliation proceedings are terminated, on the date of the declaration; or
o
by a written declaration of a party to the other oth er party and the conciliator, if appointed, to the effect that the conciliation proceedings are terminated, on the date of the declaration.
7. Costs of conciliation proceedings. proceedings.
92
Upon termination of the conciliation proceedings, the conciliator shall fix the costs of the conciliation and give written notice thereof to the parties.
93
For the purpose, “costs” means reasonable costs relating to — to —
the fee and expenses of the conciliator and witnesses requested by the conciliator with the consent of the parties;
90
See Section 75 of the Arbitration & Conciliation Act, 1996. See Section 76 of the Arbitration & Conciliation Act, 1996. 92 See Section 78 of the Arbitration & Conciliation Act, 1996. 93 See Section 78(1) of the Arbitration & Conciliation Act, 1996. 91
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any expert advice requested by the conciliator with the consent of the parties;
any assistance provided pursuants Section 64(2)(b) and Section 66, that is to say, where — to appoint a Conciliator in conciliation proceedings with two conciliator, each
o
party may appoint one Conciliator; in order to facilitate the conduct of the conciliation proceedings, the parties or
o
the conciliator with the consent of the parties arranges for administrative assistance by a suitable institution or person. any other expenses incurred in connection with the conciliation proceedings and the
settlement agreement. The costs shall be borne equally by the parties, unless the settlement agreement provides for a different apportionment. All other expenses incurred by a party shall be borne by that party.
94
The conciliator may direct each party to deposit an equal amount as an advance for the costs aforesaid, which he expects to be incurred.
95
During the course of the conciliation
proceeding, the conciliator may direct supplementary deposits in an equal amount from each 96
party.
If such aforesaid required deposits are not paid in full by both parties within thirty
days, the conciliator may suspend the proceedings or may make a written declaration of termination of the proceedings to the parties, to be effective on the date of such declaration.
97
Upon such termination of the conciliation proceedings, the conciliator shall furnish accounts of the proceedings and of the deposits received and return any unexpected balance to the 98
parties.
Mediation According to the Encyclopaedia of the Laws of England , mediation is the technical term in international law which signifies the interposition by a neutral and friendly state between two states at war or on the eve of war with each other, of its good offices to restore
94
See Section 78(3) of the Arbitration & See Section 79(1) of the Arbitration & 96 See Section 79(2) of the Arbitration & 97 See Section 79(3) of the Arbitration & 98 See Section 79(4) of the Arbitration & 95
Conciliation Act, 1996. Conciliation Act, 1996. Conciliation Act, 1996. Conciliation Act, 1996. Conciliation Act, 1996.
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or preserve peace. The term is sometimes used as a synonym of intervention, but mediation differs from it is being purely a friendly act. The phrase armed mediator is a misnomer. 100
As per Black’s Law Dictionary
99
mediation is the method of non-binding dispute
resolution involving a neutral third party who tries to help the disputing parties reach a mutually reachable solution. The employment of the procedures of good offices and mediation involves the use of a third party, whether an individual or individuals, a state or group of states or an international organisation, to encourage the contending parties to come to a settlement. Unlike the techniques of arbitration, the process aims at persuading the parties to a dispute to reach satisfactory terms for its termination by themselves. Provisions for settling the dispute are not prescribed.
101
As a form of alternative dispute resolution, mediation involves the act of a neutral third party (usually a retired Judge or an experienced lawyer) to facilitate the settlement of dispute between the two contending parties. It differs from arbitration in the sense that arbitration is governed by the arbitration agreement wherein the arbitrator is nominated by the disputant parties. The mediator often asks the parties to put forth their views and claims in a joint session before melting them separately to explore the possibilities of settlement of the dispute. However, unlike an arbitration award, the settlement arrived at the end of the mediation does not have the binding effect on the parties. So also, the settlement made through the process of mediation is not enforceable as a decree of the Court as in the case of an arbitral award which has the status and recognition as a decree passes by a Civil Court.
102
Though the mediator is not required to follow the procedural law in arriving at a settlement between the contending parties, he must not act contrary to the principles of natural justice and fair play. He should be impartial and neutral in his conduct of negotiation with the parties. Mediation as an alternative dispute resolution method is being increasingly used in the commercial sector at national and international level because it is relatively cheap, less time 99
th
Markanda, P.C.; Law Relating to Arbitration & Conciliation, 6 Ed., Wadhwa & Company Nagpur, 2006, p. 508. 100 Seventh Ed., p. 996. 101 th Shaw, Malcom N., International Law, 6 Ed., Cambridge University Press, New York, 2008. p. 1018. 102 rd Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3 . Ed., Central Law Agency, Allahabad 2006, p. 266.
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consuming and settles disputes in a consensual manner. This mode of settlement being out of the purview of formal legislative enactment helps the parties to avoid rigid legal procedures and technicalities of law and reach a solution with their mutual consent.
103
Emphasizing the need for utilization of ADRs including conciliation, mediation, etc. as means of settlement of disputes, the Apex Court in Guru Nanak Foundation Singh & Sons
104
v.
Rattan
observed:
"Interminable, time consuming, complex and expensive Court procedure impelled jurists to search for an alternative forum, less formal, more effective and speedy for resolution of disputes avoiding procedural claptrap and this led them to the Arbitration Act, 1940. However, the way in which the proceedings under the Act are conducted and without exception challenged in Court, has made lawyers laugh and legal philosophers weep. Experience shows and law reports bear ample testimony that the proceedings under the Act have become highly technical, accompanied by unending prolixity, at every stage providing a legal trap to the unwary. Informal forum chosen by the parties for expeditious disposal of their disputes has by the decision of the Courts, been clothed with 'legalese' of unforceable complexity.” In yet another case, the Supreme Court in Raipur Development Authority v.
Chokhamal Contractors, Contractors, 105 inter-alia, observed:
“The system of dispute resolution has of late, acquired a certain degree of notoriety by the manner in which in many cases, the financial interests of Government have come to suffer by awards which have raised eyebrows by doubts as t o their rectitude and propriety.”
Restrictions on Mediator
106
Mediation not being a statutory process, the powers of mediator i s not defined under any statute. His main function is to appraise the parties about the pros and cons relating to the subject – matter of the dispute and help them in reaching a settlement by mutual consent. There are, however, certain restrictions on the powers of a mediator which may briefly be stated thus: 103
Ibid. AIR 1981 SC 2071, 2076. 105 AIR 1990 SC 1426. 106 rd See Paranjape, Dr.V.N.; Arbitration and Alternative Dispute Resolution, 3 . Ed., Central Law Agency, Allahabad 2006, p. 268. 104
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He cannot compel attendance of any person or production of any document.
Mediation being a consensual process, there is no question of mediator making an ex parte settlement.
The settlement arrived at by mediator lacks enforceability because of the non-statutory nature of his functions.
He can only persuade the parties to reach a settlement and has no power to compel them to accept his settlement decision.
He functions as a mediator only till the parties so desire and seizes to act as such if any party withdraws his consent.
The mediator cannot modify or alter the subject-matter of the dispute; and
He has no power, to penalise a recalcitrant party.
As stated earlier, the settlement made made by, the mediator is not legally enforceable because it lacks statutory recognition. Therefore, the enforcement of settlement made by mediator depends upon the willingness of the parties. However, if the settlement is converted into a written agreement between the parties, it becomes enforceable like any other contract under the law of contracts. Section 74 of the Arbitration and Conciliation Act, 1996 also supports this contention. The Delhi High Court in Union of India
v. M/s
Jagat Ram
107
has held that if the
settlement made by the Mediator/conciliator is beyond the scope of the subject-matter of the dispute itself, the Court may refuse execution thereof although the parties have not challenged the same and are agreed for its it s execution.
Negotiation Negotiation falls in the category of Alternative Dispute Resolution, which is preventive in nature. It signifies resolving disputes by dialogue. It is perhaps the most ancient tradition of resolving dispute which mankind has known. In face one negotiates everyday willingly or unwillingly – unwillingly – even even when there is no dispute. Of all the procedures used to resolve differences, the simplest and most utilised form is understandably negotiation. It consists basically of discussions between the interested parties with a view to reconciling divergent opinions, or at least understanding the different 107
Society , AIR 1976 P&H 94. AIR 1996 Del. 191. See also Ram Singh v. G.A. Cooperative Service Society
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positions maintained. It does not involve any third party, at least at that stage, and so differs from the other forms of dispute management. management. In addition to being an extremely active method of settlement itself, negotiation is normally the precursor to other settlement procedures as the parties decide amongst themselves how best to resolve their differences.
108
It is eminently
suited to the clarification, if not always resolution, of complicated disagreements. It is by mutual discussions that the essence of the differences will be revealed and the opposing contentions elucidated. Negotiations Negotiations are the most satisfactory means to resolve disputes since 109
the parties are so directly directl y engaged.
In some countries scientific techniques of negotiation have been developed. There are courses on negotiation. Many institutions impart training. A real negotiation applies win-win situation in which all parties are satisfied. There are certain techniques, viz., analysing the interest of the parties and planning negation and determining the parameters. There are various parameters which are stated. What are the expectations from the negotiations? What is the minimum that an agreement can reach or what is the negotiation strategy? What are the most important interests of the parties? How does one interact with or manage people? The next stage is to select the appropriate negotiation techniques which include adapting the changing situation without losing sight of the objective; avoiding confrontation and trying to understand the interest of the other party. Some aspects which can interfere with negotiation are personal position and interest, psychological and emotional aspects of the persons, difficulty in communication, etc.
110
Negotiations are generally characterized by two types of strategies: one is called adversarial strategy and the other is called problem-solving strategy. An adversarial strategy seeks to maximize the gain without regard to how the other participants fare – fare – to to win as much as can be won by agreement. It assumes: (a) Limited resources which are to be distributed – what is gained by one negotiator is lost by the other. (b) All participants are in conflict over-limited, resources offers, counteroffers, and bargaining power – power – resulting resulting in agreement of failure.
108
See Judge Nrevo, Fisheries Jurisdiction Case, ICJ Reports, 1973, p. 3, p. 45; 55 ILR p. 183, 225. th Shaw, Malcom N., International Law, Cambridge University Press, New York, 6 Ed., 2008. p. 1014. 110 nd Mohta, V.A. & Mohta, Anoop V.; Arbitration, Conciliation & Mediation, Manupatra, 2 Ed., 2008, p. 541. 109
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Labour management negotiations fall in this category. The outcome depends on the solving strategy resolves around ‘interest’, bargaining power. On the other hand, a problemproblem-solving instead of ‘positions’, i.e. the position in which two persons are placed. It seeks fair deal or solution. It seeks to promote mutual gain, that is ‘win -win’ situation for both the parties, and here interaction or the correlation between negotiation and other form of Alternative Dispute Resolution comes into being. Let us again take an example of industrial disputes. In the process of bargaining, one party, usually labour, is weak. However, a labour union, thinking that it is not able to negotiate properly, may go to a conciliator, i.e. it invokes conciliation machinery provided under the Industrial Disputes Act. The conciliation officer, here, acts as a facilitator. He may be a negotiator for both the parties. In fact, the third person is a facilitator who facilitates the negotiations and there is his role to see that there should be a proper and fair solution, agreement, or settlement where both the parties are in ‘win -win’. So, even in negotiations it may not be necessary that two parties are negotiating between themselves. Even negotiating skills are required, and mediators and conciliators as well, where they have to ensure proper settlement and if they know these techniques, they will be able to get the matter settled between the parties or would be able to facilitate such a settlement.
111
What makes mediation different from negotiation is the involvement of a mediator. Role of a neutral is to facilitate or help the parties to resolve their differences. The power of having a third person in a room whose only agenda is to help the negotiating process do better and if possible to reach a settlement can help transform a dispute. For this reason mediation has also been defined defi ned as ‘assisted negotiation’.
111
112
Alternative Mode of Dispute Resolution’ by Justice A.K. Sikri, Judge, Delhi High Court Cited by Negotiation – Alternative
Mohta, V.A. & Mohta, Anoop V., Arbitration, Conciliation & Mediation, Manupatra, 2 112 See Supra 110.
nd
Ed., 2008, p. 542.
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