Alternative Dispute Resolution in India: Jurisprudential Developments and Contemporary Challenges

Alternative Dispute Resolution in India: Jurisprudential Developments and Contemporary Challenges

1. Introduction

Alternative Dispute Resolution (“ADR”) has emerged as an indispensable complement to court-annexed adjudication in India, responding to chronic docket congestion, rising litigation costs and the constitutional mandate of access to justice.[1] Legislatively anchored in the Code of Civil Procedure, 1908 (“CPC”)—most notably via the post-2002 incarnation of Section 89—and in the Arbitration and Conciliation Act, 1996 (“1996 Act”), ADR today encompasses arbitration, conciliation, mediation, judicial settlement (including Lok Adalat) and other consensual hybrids. This article critically analyses the evolution and contemporary contours of ADR jurisprudence in India, synthesising leading Supreme Court and High Court decisions with statutory design.

2. Historical and Statutory Framework

2.1 From Panchayats to Modern Codes

Indigenous dispute-settlement by panch assemblies long pre-dated colonial codification.[2] Statutory regulation began with the Second Schedule to the CPC (1879), progressed to the Arbitration Act, 1940, and attained structural maturity with the UNCITRAL-inspired 1996 Act, which unified domestic and international commercial arbitration and introduced conciliation.

2.2 Section 89 CPC and the 2002 Amendments

Section 89, inserted by the CPC (Amendment) Act 1999 and operationalised in 2002, obliges civil courts, post completion of pleadings, to explore settlement through five ADR modalities. The provision was upheld in Salem Advocate Bar Association (II) v. Union of India (“Salem II”)[3], with the Court constituting the Rao Committee to draft the Civil Procedure ADR and Mediation Rules, 2003 subsequently adopted (mutatis mutandis) by several High Courts.

2.3 The Arbitration and Conciliation Act, 1996

The 1996 Act divides arbitration law into four thematic parts. Part I (domestic arbitration and some international commercial arbitration) contains key provisions—Sections 2(2), 8, 11, 34 and 37—while Part II governs recognition and enforcement of foreign awards. The Act has been repeatedly judicially re-mapped, most conspicuously on the questions of territoriality and arbitrability, discussed below.

3. Section 89 CPC: Judicial Construction and Procedural Implications

3.1 Salem II: Constitutional Validation and Model Rules

The Supreme Court in Salem II dismissed challenges to the 1999 & 2002 amendments, emphasising that Section 89 was an “enabling” rather than “compulsory” mechanism; it directed High Courts to craft ADR Rules and training modules for referral judges.[4]

3.2 Consent, Competence and Timing — Afcons Infrastructure

A decisive exposition followed in Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co.[5] wherein the Court held:

  • Arbitration cannot be imposed without ad idem consent, distinguishing it from other ADR forms that the court may direct absent consent.
  • Referral must precede framing of issues; once trial commences, Section 89 becomes otiose.
  • The judgment appends an indicative taxonomy of disputes “normally suitable” for ADR—subsequently reiterated in Perry Kansagra v. Smriti Kansagra[6] and High-Court decisions such as Sreelal v. Murali Menon.[7]

3.3 Court-Annexed Mediation and Lok Adalat

Judicial enthusiasm for mediation is palpable. In Vikram Bakshi v. Sonia Khosla[8] the Court extolled mediation as a “healing” mechanism, resonating with global best practice. Family-law settings likewise evidence judicial nudging towards mediation, e.g., K. Srinivas Rao v. D.A. Deepa[9], where the Court suggested pre-litigation mediation centres to curb Section 498-A misuse.

4. Arbitration Jurisprudence: Key Themes

4.1 Territoriality and the Reach of Part I

The initial pro-extension stance in Bhatia International v. Bulk Trading S.A. applied Part I to foreign-seated arbitrations unless excluded.[10] A Constitution Bench in Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (“BALCO”) prospectively overruled Bhatia, clarifying that Part I applies strictly to arbitrations seated in India, thereby reinforcing the seat-centric doctrine of territoriality.[11]

4.2 Limits of Arbitrability

The Court in Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. demarcated non-arbitrable “actions in rem” from arbitrable “actions in personam”, holding mortgage-enforcement suits non-arbitrable.[12] This doctrinal clarity guides lower courts in screening Section 8 applications, as underscored by subsequent High-Court rulings.[13]

4.3 Judicial Review of Awards: Public Policy and Patent Illegality

ONGC v. Saw Pipes Ltd. expanded the “public policy” ground under Section 34, introducing “patent illegality” as a sub-category warranting judicial annulment where the award contravenes statute or contractual stipulations.[14] The earlier decision in Renusagar Power Co. v. General Electric Co. had already adopted a narrow public-policy test for foreign awards—illegality must offend (i) fundamental policy of Indian law, (ii) interests of India or (iii) justice or morality.[15] Together, these rulings calibrate a dual-standard: expansive review for domestic awards, restrained review for foreign awards, aligning with the New York Convention ethos.

5. Systemic Efficacy and Persistent Challenges

5.1 Quantitative Impact on Docket Congestion

Empirical studies by the Law Commission and NITI Aayog reveal that mandatory referral under Section 89 has modestly reduced trial-stage pendency, particularly in commercial and matrimonial suits, though uptake varies widely across states.[16]

5.2 Capacity Deficits and Quality Control

Uniform mediator accreditation remains elusive; training programmes envisioned in Salem II are unevenly implemented, leading to quality asymmetries.[17] Institutional arbitration suffers from ad-hocism and cost unpredictability, prompting recent legislative interventions—the Arbitration and Conciliation (Amendment) Acts 2019 & 2021—to establish an arbitral institution council and to mandate time frames.

5.3 Consent and Power Imbalances

While Afcons Infrastructure safeguards autonomy by requiring consensus for arbitration, power asymmetries in contractual settings (particularly consumer and employment contexts) raise questions on the voluntariness of arbitration clauses. Proposed amendments to the Consumer Protection Act and recent Supreme Court dicta on unconscionable arbitration agreements may recalibrate this terrain.

5.4 Enforcement Obstacles

Despite pro-enforcement jurisprudence, resistance persists at the execution stage—often through collateral civil suits or Section 34 petitions—diluting ADR’s time-saving promise. Fast-track enforcement benches and cost-sanctions (endorsed in Salem II) warrant robust adoption.

6. Comparative and Policy Perspectives

India’s ADR evolution mirrors global trends yet retains peculiarities—a court-centric mediation model, expansive judicial review of domestic awards, and statutorily embedded Lok Adalats. Comparative lessons from Singapore’s Mediation Act, 2017 and the UK’s streamlined Arbitration Act, 1996 suggest that legislative precision coupled with judicial minimalism enhances ADR efficacy.

7. Recommendations

  • Institutionalisation: Fast-track operationalisation of the Arbitration Council of India to accredit institutions and publish fee schedules.
  • Mandatory Pre-Litigation Mediation: Akin to Italy’s model for specific subject-matters, to be piloted in commercial courts constituted under the Commercial Courts Act, 2015.
  • National Mediator Accreditation Standards: Harmonise training, ethics and continuing education.
  • Digital ADR Platforms: Leveraging ODR (Online Dispute Resolution) to enhance accessibility, as piloted during COVID-19 by several High Courts.
  • Statutory Recognition of “Irretrievable Breakdown”: Amend the Hindu Marriage Act to integrate ADR-driven settlements and reduce adversarial litigation.

8. Conclusion

Indian ADR jurisprudence has traversed a dynamic arc—from affirming the constitutional validity of Section 89 and sculpting its procedural contours, to refining doctrines of arbitrability, territoriality and public policy. While courts have consistently championed ADR’s normative virtues, the transformative potential of ADR will materialise only through calibrated statutory reforms, institutional capacity-building and cultural re-orientation of the Bar and Bench. The trajectory of decisions such as Salem II, Afcons Infrastructure, BALCO, Booz Allen and Saw Pipes signals judicial readiness; the onus now rests on policy-makers and stakeholders to consolidate these gains and embed ADR as a first-resort, not an afterthought, in India’s justice ecosystem.

Footnotes

  1. Article 39A, Constitution of India; Law Commission of India, Report No. 221 (2009).
  2. N.C. Budharaj v. Union of India (2001) (observing ancient practice of panch adjudication).
  3. Salem Advocate Bar Association, T.N. v. Union of India (2005) 6 SCC 344.
  4. Ibid.
  5. Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. (2010) 8 SCC 24.
  6. Perry Kansagra v. Smriti Madan Kansagra, SLP(C) No. 9267/2018 (SC, 2019).
  7. Sreelal v. Murali Menon, 2014 SCC OnLine Ker 28501.
  8. Vikram Bakshi v. Sonia Khosla, (2014) SC (multiple parallel citations).
  9. K. Srinivas Rao v. D.A. Deepa (2013) 5 SCC 226.
  10. Bhatia International v. Bulk Trading S.A. (2002) 4 SCC 105.
  11. Bharat Aluminium Co. v. Kaiser Aluminium Technical Services Inc. (2012) 9 SCC 552.
  12. Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd. (2011) 5 SCC 532.
  13. Empee Sugars & Chemicals Ltd. v. Paharpur Cooling Towers Ltd. 2014 SCC OnLine AP 106; Shivhare Road Lines v. HPMEL, 2012 SCC OnLine MP 768.
  14. ONGC v. Saw Pipes Ltd. (2003) 5 SCC 705.
  15. Renusagar Power Co. v. General Electric Co. 1994 Supp (1) SCC 644.
  16. Law Commission of India, Report No. 238 (2011).
  17. High Court of Delhi, Mediation and Conciliation Project Committee Reports (various years).