Need for ADR, international commitments and suitability of disputes

1. Domestic needs

• Pendency and delay. Indian courts carry a backlog running into crores of cases, and a civil suit with appeals can take a generation. Justice delayed defeats the right to a speedy trial that the Supreme Court has read into Article 21.
• Access to justice for the poor. Article 39A, inserted by the Constitution (Forty-second Amendment) Act, 1976, directs the State to secure that the legal system promotes justice on a basis of equal opportunity and to provide free legal aid. The Legal Services Authorities Act, 1987 and its Lok Adalats are the direct result.
• Cost and technicality of litigation, which deter small claimants.
• Commercial certainty. Investors want disputes resolved quickly by an expert tribunal and awards that can be enforced. The 2015, 2019 and 2021 amendments to the Arbitration and Conciliation Act, 1996 were made largely to make India an arbitration-friendly seat.
• Relationship disputes. Family, neighbourhood and employment disputes are better settled than adjudicated, because the parties must continue to live or work together.
• Indigenous tradition. Settlement by panchayats and elders long predates the adversarial courts; ADR revives a familiar idea in a regulated form.

2. Constitutional and international commitments

Article 51(d) directs the State to endeavour to encourage the settlement of international disputes by arbitration. India's international commitments in this field are:

• Geneva Protocol, 1923 and Geneva Convention, 1927 on foreign arbitral awards, given effect by Chapter II of Part II of the 1996 Act.
• New York Convention, 1958 on the Recognition and Enforcement of Foreign Arbitral Awards, which India signed and ratified with the reciprocity and commercial reservations. It is reproduced in the First Schedule to the 1996 Act and implemented by sections 44 to 52.
• UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980. The Preamble to the 1996 Act records that the General Assembly recommended that all countries give due consideration to them, and the Act is modelled on both. Part I follows the Model Law closely; Part III follows the Conciliation Rules.
• Singapore Convention on Mediation, 2019 (United Nations Convention on International Settlement Agreements Resulting from Mediation). India signed it in 2019. The Mediation Act, 2023 deals with international mediation conducted in India (section 3(g)). Whether India has ratified the Convention could not be confirmed here, so do not assert ratification in an answer.

3. Suitability: which method for which dispute

• Negotiation suits any dispute where the parties can still talk: a supplier's delayed payment, a lease renewal.
• Mediation suits disputes where relationships and emotions matter: matrimonial and custody disputes, partition among family members, neighbourhood disputes, employer-employee grievances, consumer complaints, medical negligence claims where the patient wants an explanation as much as money.
• Conciliation suits commercial disputes where the parties want an expert to propose terms, and industrial disputes, where statute requires it.
• Arbitration suits commercial, construction, shipping, insurance and international trade disputes needing an expert and a binding result.
• Lok Adalat suits motor accident claims, bank recovery, electricity and telephone bills, pension and small money claims, and compoundable criminal cases.

The Supreme Court gave a working list in Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., 2010 INSC 431, (2010) 8 SCC 24. Cases normally unsuitable for ADR include representative suits under Order I Rule 8 CPC, disputes on election to public office, grant of authority by the court after inquiry (probate, letters of administration), cases involving serious allegations of fraud, forgery or coercion, cases needing protection of courts (minors, persons of unsound mind), cases with prosecution for criminal offences, and suits against the Government for declaration of title. Cases normally suitable include trade and commercial disputes, disputes arising from strained relationships (matrimonial, maintenance, custody), disputes where the relationship must be preserved (neighbours, members of societies), tortious claims including motor accident claims, and consumer disputes. This list is close to the First Schedule to the Mediation Act, 2023, which names disputes not fit for mediation.

4. Arbitrability: what cannot go to arbitration

Section 2(3) of the 1996 Act preserves any law under which certain disputes may not be submitted to arbitration, and section 34(2)(b)(i) lets a court set aside an award on a subject matter not capable of settlement by arbitration.

In Booz Allen & Hamilton Inc. v. SBI Home Finance Ltd., 2011 INSC 301, (2011) 5 SCC 532, the Court distinguished rights in personam, which are generally arbitrable, from rights in rem, which are not. It listed as non-arbitrable: criminal offences; matrimonial disputes (divorce, judicial separation, restitution, custody); guardianship; insolvency and winding up; testamentary matters; and eviction or tenancy matters governed by special statutes giving protection to tenants. A suit to enforce a mortgage by sale was held non-arbitrable.

In Vidya Drolia v. Durga Trading Corporation, 2020 INSC 697, (2021) 2 SCC 1, a three-judge Bench laid down a fourfold test. A dispute is non-arbitrable when the cause of action and subject matter:

• relate to actions in rem that do not pertain to subordinate rights in personam arising from rights in rem;
• affect third-party rights, have erga omnes effect, or require centralised adjudication;
• relate to inalienable sovereign and public interest functions of the State; or
• are expressly or by necessary implication made non-arbitrable by a statute.

The Court held that landlord-tenant disputes under the Transfer of Property Act, 1882 are arbitrable (unless a rent control statute applies), overruling Himangni Enterprises. It also held that at the reference stage under sections 8 and 11 the court examines arbitrability only prima facie: “when in doubt, do refer”.

5. Civil Procedure Code and ADR (link to the next note)

The domestic need was answered for pending suits by section 89 and Order X Rules 1A to 1C of the CPC, inserted by the Code of Civil Procedure (Amendment) Act, 1999 and in force from 1 July 2002. These are taken up separately.

How this is examined

“Discuss in detail the suitability of ADRs to different types of disputes” (November 2021) and “Explain the needs for alternative dispute resolution systems” (June 2019) are standard nine-mark questions. For need, write domestic needs, then Article 39A and Article 51(d), then the conventions. For suitability, go method by method, then give the Afcons lists and the Booz Allen and Vidya Drolia tests to show which disputes must stay in court.