Alternative Dispute Resolution Mechanism

  • The process by which disputes between the parties are settled or amicably resolved without the intervention of judicial institutions and any trial is known as Alternative Dispute Resolution.
  • It is non-adversarial i.e, competing parties work together cooperatively to reach the best resolution for everybody.
  • It is an instrument to reduce the case burdens on the conventional judicial system while delivering a well-rounded and satisfying experience for the parties involved.
  • ADR offers to resolve all types of matters including civil, industrial, and family, etc where people are finding it difficult to settle.
  • Generally, ADR uses a neutral third party who helps parties to communicate, discuss the differences and resolve the dispute.
  • ADR enables individuals and groups to maintain co-operation, social order, and provides an opportunity to reduce hostilities.
  • It provides the opportunity to “expand the pie” through creative, collaborative bargaining, and fulfill the interests driving their demands.

History of ADR in India

  • Ancient India
    • Since the Vedic period, Indians have used non-adversarial methods for resolving their disputes.
    • Yajnavalkya and Narada highlighted that Kula (family, community, caste disputes), Shreni (trade disputes) and Puga tribunals (community disputes within a locality) were resolving the disputes in ancient India
  • Medieval India
    • Tahkeem is an Arabic word for arbitration and the word for an arbitrator is Hakam. Islamic law mandated that the arbitrator must be neutral and the arbitral award cannot be challenged on merits.
  • Modern India
    • Britishers had given formal recognition to arbitration through legislation. Arbitration, as a dispute resolution process, was accepted as early as 1879and found its place in the Civil Procedure Code in 1908.
  • Post-Independence India
    • The Indian legislature enacted The Legal Services Authorities Act, 1987 by constituting the National Legal Services Authority as a Central Authority (Chief Justice of India as its Patron-in-Chief).
    • The Law Commission in its 129th report and Malimath Committee recommended making it mandatory for courts to refer disputes for resolutions through alternate means if the resolution is possible.
    • The Arbitration and Conciliation Act, 1996 makes elaborate provisions for conciliation of disputes arising out of legal relationships, whether contractual or not.
    • In 1999, the Civil Procedure Code Amendment Act of 1999 was passed inserting Section 89 in the Code of Civil Procedure 1908, providing for the reference of cases pending in the Courts to ADR which included mediation.
    • Procedure for plea-bargaining was included in the Code of Criminal Procedure in 2005. Plea-bargaining means pre-trial negotiation between the accused and the prosecution during which the accused agrees to plead guilty in exchange for certain concessions.
    • Recently, in 2015, the amendment to Arbitration and Conciliation Act was enacted to bring Indian arbitration closer to international standards such as the model law by UNCITRAL on international commercial arbitration.


  • In this, the dispute is submitted to an arbitral tribunal which makes a decision (called an “award”) on disputes that are generally binding on the parties.
  • It is less formal than a court trial and rules of evidence are somewhat relaxed.
  • Generally, there is no right to appeal against the arbitrator’s decision.
  • Barring a few measures, there is very little scope for judicial intervention in the arbitration process.


  • A non-binding procedure in which an impartial third party, the conciliator, assists the parties to try to reach a mutually acceptable resolution of the dispute.
  • It is a less formal type of arbitration where parties are free to accept or reject the recommendations of the conciliator.
  • If both parties accept the settlement, it is final and binding on the parties.


  • Here, an impartial person called a “mediator” helps the parties to reach a mutually acceptable resolution.
  • The mediator himself does not decide on the dispute but helps the parties communicate so they can try and settle the dispute by themselves.
  • Hence, the control of the outcome in mediation is with the parties in dispute.


  • This is a non-binding procedure in which discussions are initiated between the parties without the intervention of the third party.
  • It is the most common form of ADR.
  • The negotiation occurs between friends, families, businesses, non-profit organizations, government branches, among nations, etc.

Advantages of ADRs

  • The resolution of disputes takes place usually in private – helping maintain confidentiality.
  • It is more viable, economic, and efficient.
  • Procedural flexibility saves valuable time and money and absence of stress of a conventional trial.
  • This often results in creative solutions, sustainable outcomes, greater satisfaction, and improved relationships.
  • The possibility of ensuring that specialized expertise is available on the tribunal in the person of the arbitrator, mediator, conciliator or neutral adviser.
  • Further, it offers greater direct control over the outcome. Personal relationships may also suffer less.

Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Bill, 2018

  • The Act enables creation of commercial divisions in High Courts and commercial courts at district level to adjudicate commercial disputes such as disputes related to contracts for provision of goods and services and construction contracts.
  • The amendment is aimed at improving ease of doing business in India. It makes the following amendments in the 2015 act:
  1. Value of a commercial dispute to be reduced from 1 Crore to 3 Lakhs. This would bring a lot of commercial disputes of lesser value to be decided by commercial courts.
  2. Commercial Courts at district Judge level to be established for the territories where the above mentioned 5 High Courts have ordinary original civil jurisdiction
  3. Pre-Institution Mediation process to be introduced. Under this commercial disputes can be resolved outside the courts under the Legal Services Authorities Act, 1987

ADR Mechanism – Recent News:

  • The Central Board of Direct Taxes announced specific instructions for the Mutual Agreement Procedure (MAP), an alternate dispute resolution mechanism included in India’s tax treaties with other nations.
  • Online dispute resolution (ODR) is finding takers in India as an easier, cost-effective way to settle cases.
  • These are the early signs of the adoption of an alternative dispute resolution mechanism being widely used in China and the US, particularly in cases related to online transactions.
  • Online dispute resolution (ODR) has the potential to decentralize and democratize the justice delivery system for citizens.
  • Online dispute resolution (ODR) would make dispute resolution more affordable, amicable, and accessible.

Arbitration and Conciliation (Amendment) Act 2019:

  • The Arbitration and Conciliation (Amendment) Bill, 2019 was passed by Rajya Sabha. It seeks to amend the Arbitration and Conciliation Act, 1996.
    • The Act contains provisions to deal with domestic and international arbitration, and defines the law for conducting conciliation proceedings.
  • Key features
    • Arbitration Council of India: The Bill seeks to establish an independent body called the Arbitration Council of India (ACI) for the promotion of arbitration, mediation, conciliation and other alternative dispute redressal mechanisms.
    • Its functions include:
      • Framing policies for grading arbitral institutions and accrediting arbitrators.
      • Making policies for the establishment, operation and maintenance of uniform professional standards for all alternate dispute redressal matters.
      • Maintaining a depository of arbitral awards (judgments) made in India and abroad.
    • Appointment of arbitrators: Under the 1996 Act, parties were free to appoint arbitrators. In case of disagreement on an appointment, parties could request the Supreme Court, or the High Court, or any person or institution designated by such Court, to appoint an arbitrator.
      • Under the Bill, the Supreme Court and High Courts may now designate arbitral institutions, which parties can approach for the appointment of arbitrators.
      • For international commercial arbitration, appointments will be made by the institution designated by the Supreme Court.
      • For domestic arbitration, appointments will be made by the institution designated by the concerned High Court.
      • In case there are no arbitral institutions available, the Chief Justice of the concerned High Court may maintain a panel of arbitrators to perform the functions of arbitral institutions.
    • Relaxation of time limits: Under the Act, arbitral tribunals are required to make their award within a period of 12 months for all arbitration proceedings.
      • The Bill seeks to remove this time restriction for international commercial arbitrations. It adds that tribunals must try to dispose of international arbitration matters within 12 months.

Arbitration & Conciliation (Amendment) Bill, 2021

Highlights of the Bill

  1. It seeks to amend the Arbitration and Conciliation Act, 1996 so as to (i) enable automatic stay on awards in certain cases and (ii) specify by regulations the qualifications, experience and norms for accreditation of arbitrators.
  2. Seeks to ensure that stakeholder parties can seek an unconditional stay on enforcement of arbitral awards in cases where the “arbitration agreement or contract is induced by fraud or corruption.”
  3. Also does away with the 8th Schedule of the Act that contained the necessary qualifications for accreditation of arbitrators.
  4. Added a provison in Section 36 of the Arbitration Act and will come into effect retrospectively from October 23, 2015. As per this amendment, if the Court is satisfied that a prima facie case is made out that the arbitration agreement or contract which is the basis of the award was induced or effected by fraud or corruption, it will stay the award unconditionally pending disposal of the challenge made to the award under Section 34.

Issues raised with respect to proposed amendment to Section 36 of the Act

  1. It is very easy for the losing party to allege corruption and obtain an automatic stay on enforcement of the arbitral award. Thereafter, the parties will have to wait for enforcement till final disposal by the Court. This defeats the very objective of the alternate dispute mechanism by drawing parties to Courts and making them prone to prolonged litigation.
  2. Legislation does not define Fraud/ Corruption.
  3. Retrospective application of Amendment Act (from 2015) with respect to automatic stay may open floodgates of litigation.
  4. Amendment will affect enforcement of contracts and ultimately affect ease of doing business in India.

Draft Mediation Bill, 2021

Which laws in India allow mediation?

  • Mediation finds legitimacy in some specific laws such as:
  • The Code of Civil Procedure, 1908, the Arbitration and Conciliation Act, 1996,
  • The Companies Act, 2013,
  • The Commercial Courts Act, 2015,
  • The Consumer Protection Act, 2019,
    • However, there is no standalone legislation as yet.

Need of Mediation Bill

  • Strengthening of Alternative Dispute Resolution (ADR)
    • The Government has been taking various policy initiatives for the promotion and strengthening of ADR mechanisms.It would facilitate quick disposal of disputes, outside of traditional court systems. 
    • Bringing a standalone law on Mediation is a continuation of the exercise.
  • Unify the different enactments and rules and regulations related to Mediation
    • The laws on Mediation are contained in several enactments including different Rules and Regulations.It was necessary to ascertain the present statutory framework on mediation.
    • The need was regularly felt for bringing umbrella legislation including amendments in the existing laws.
  • Aligning Indian Norms with International practices
    • The Bill takes into contemplation the international practice of using the terms ‘conciliation’ and ‘mediation’ interchangeably. 
  • Singapore Convention on Mediation
    • India is a signatory to the Singapore Convention on Mediation.
    • Hence, it has also become expedient to enact a law in mediation on issues of domestic and international mediation.
  • Objectives of the Bill
    • To promote, encourage and facilitate mediation especially institutional mediation for resolution of disputes commercial and otherwise, 
    • To enforce domestic and international mediation settlement agreements. 
    • To provide for a body for the registration of mediators, to encourage community mediation. 
    • To make online mediation as an acceptable and cost-effective process and for matters connected therewith or incidental thereto has been prepared. 
  • Main Features of the Bill 
    • The draft Bill proposes for pre-litigation mediation, at the same time, it also safeguards the interest of the litigants to approach the competent adjudicatory forums/courts in case urgent relief is sought.
    • The successful outcome of mediation in the form of a Mediation Settlement Agreement (MSA) has been made enforceable by law
    • Since the MSA is out of the consensual agreement between the parties, the challenge to the same has been permitted on limited grounds.
    • The mediation process protects the confidentiality of the mediation undertaken and provides for immunity in certain cases against its disclosure.
    • The registration of MSA has also been provided with State, District, Taluk Legal Authorities within 90 days
    • To ensure maintenance of authenticated records of the settlement.
    • Provides for the establishment of the Mediation Council of India.
    • Provides for community mediation.

Reforms suggested by NITI Aayog for ADR in Three Year Action Agenda 2017-18 to 2019-20

  • Introduce a judicial performance index: The first step would be to establish a judicial performance index. Such an index could be established to help High Courts and High Court Chief Justices keep track of performance and process improvement at the District Courts and subordinate levels for reducing delay.
  • Introduce an administrative cadre in the judicial system: There is a need to create a separate administrative cadre in the judiciary to manage the system. To maintain judicial independence, the cadre should report to the Chief Justice in each High Court.
  • Increase use of Information and Communication Technology (ICT): High priority should be given to court process automation and ICT enablement for electronic court and case management, including electronic management of court schedules and migration of all courts to the unified national court application software.
  • Streamline Judicial Appointments: Step may be taken for ensuring availability of online real time judicial statistics for determining the adequacy of Judiciary manpower and infrastructure to deal with workload of cases.
  • Shift certain large sections of workload out of the regular court system: Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 should be implemented in the largest cities to decongest existing courts. Separate traffic courts/amendment to remove requirement to pay traffic fine in court.
FREE UPSC MasterClass
This is default text for notification bar