Justice Dispensation Through Alternate Dispute Resolution System In India

 INTRODUCTION

“You have undertaken to cheat me. I won’t sue you, for the law is too slow. I’ll ruin you.”

Discords are bound to arise in society and ingenious human minds have always devised ways and means for resolution of conflicts. Nature has endowed people with rationality and they have constantly attempted to discover methods of establishing a cohesive society. Dispute resolution is one of the major functions of a stable society. Through the medium of the State, norms and institutions are created to secure social order and to attain the ends of justice or the least to establish dispute resolution processes. States function through different organs and the judiciary is one that is directly responsible for the administration of justice. In commonplace perception judiciary is the tangible delivery point of justice. Resolving disputes is fundamental to the peaceful existence of society. Therefore, effective and efficient systems for determination of disputes become an obvious appendage.

 

Justice is the foundation and object of any civilized society. The quest for justice has been an ideal which mankind has been aspiring for generations down the line. Preamble to our Constitution reflects such aspiration as “justice-social, economic and political”. Article 39A of the Constitution provides for ensuring equal access to justice. Administration of Justice involves protection of the innocent, punishment of the guilty and the satisfactory resolution of disputes.

 

The world has experienced that adversarial litigation is not the only means of resolving disputes. Congestion in court rooms, lack of manpower and resources in addition with delay, cost, and procedure speak out the need of better options, approaches and avenues. Alternative Dispute Resolution mechanism is a click to that option.

 

ALTERNATIVE DISPUTE RESOLUTION: An Indian Perspective

 

Article 21 of the Constitution of India declares in a mandatory tone that ‘no person shall be deprived of his life or his personal liberty except according to procedure established by law.’ The words “life and liberty” are not to be read narrowly in the sense drearily dictated by dictionaries; they are organic terms to be construed meaningfully. Further, the procedure mentioned in the Article is not some semblance of a procedure but it should be “reasonable, fair and just”. Thus, the Right to Speedy Trial has been rightly held to be a part of Right to Life or Personal Liberty by the Supreme Court of India. The Supreme Court has allowed Article 21 to stretch its arms as wide as it legitimately can. The reason is very simple. This liberal interpretation of Article 21 is to redress that mental agony, expense and strain which a person proceeded against in criminal law has to undergo and which, coupled with delay, may result in impairing the capability or ability of the accused to defend himself effectively. Thus, the Supreme Court has held the Right to Speedy Trial a manifestation of fair, just and reasonable procedure enshrined in Article 21.

The Constitutional philosophy propounded as Right to Speedy Trial has though grown in age by almost two and a half decades; the goal sought to be achieved is yet a far-off peak. The failures of prosecuting agencies and executive to act and to secure expeditious and speedy trial have persuaded the Supreme Court in devising solutions which go to the extent of almost enacting by judicial verdict bars of limitation beyond which the trial shall not proceed and the arm of law shall lose its hold. The validity or justness of those decisions is not the matter to be decided but the seriousness of delay in the conclusion of criminal and civil matters must be appreciated at the earliest. This seriousness was appreciated and accepted by many , including the Constitutional Courts , long before. The same has got recognition from the “legislature” as well in the form of introduction of “Alternative Dispute Resolution” (ADR) Mechanism (ADRM) through various statutes.

There is a growing awareness among the masses as well regarding ADR and people are increasingly using the same for getting their disputes settled outside the court. This will also reduce the “backlog problem’ that India is facing. It is now universally accredited that ‘Justice delayed is Justice denied’. The existing justice system is not able to cope up with the ever-increasing burden of civil and criminal litigation. There is growing awareness that in the majority of cases court action is not an appropriate remedy for seeking justice. We have to formulate effective ADR Mechanisms to ease the burden of judicial functioning. The backlog of cases is increasing day by day but criticizing judiciary for the same is a wrong practice. It must be noted that the backlog is a product of “inadequate judge population ratio” and the lack of basic infrastructure. The government has to play a pro-active role in this direction.

 

WHAT IS ALTERNATIVE DISPUTE RESOLUTION

On 4th December 1997 the Chief Ministers of States and the Chief Justices of the High Courts met in New Delhi to discuss at length the alternative means of dispute resolution. In the meeting it was declared that the present justice delivering system is not capable to bear the whole workload and it would be appropriate to deliver justice by the alternative means of disposal of disputes as well. Under this system there is a procedural flexibility and also in time and money saving besides the absence of tension of regular trial.

The term “alternative dispute resolution” or “ADR” is often used to describe a wide variety of dispute resolution mechanisms that are short of or alternative to, full-scale court processes, established by the Sovereign or the State. The term can refer to everything from facilitated settlement negotiations in which disputants are encouraged to negotiate directly with each other prior to some other legal process, to arbitration systems or mini trials that look and feel very much like a courtroom process. It included arbitration, as also conciliation, mediation and all other forms of dispute resolution outside the courts of law, which would all fall within the ambit of ADR.

ADR facilitate parties to deal with the underlying issues in dispute in a more cost-effective manner and with increased efficacy. In addition, ADRs provide the parties with the opportunity to reduce hostility, regain a sense of control, gain acceptance of the outcome, resolve conflict in a peaceful manner, and achieve a greater sense of justice in each individual case. The resolution of disputes takes place usually in private and is more viable, economic, and efficient.

ADR is not a recent phenomenon as the concept of parties settling their disputes themselves or with the help of third party, is very well-known to ancient India. Disputes were peacefully decided by the intervention of Kulas (family assemblies), Srenis (guild so men of similar occupation), Parishad, etc., the primary object of ADR movement is avoidance of vexation, expense and delay and promotion of the ideal of “access of justice” for all.

ADR system seeks to provide cheap, simple, quick and accessible justice. Under this, disputes are settled with the assistance of third party; where proceedings are simple and are conducted, by and large, in the manner agreed to by the parties. So, precisely saying, ADR aims at provide justice that not only resolves dispute but also harmonizes the relation of the parties.

 

NEED AND THE PURPOSE OF ADR IN INDIA

The growth of A.D.R in the last few decades on the one hand reflects disenchantment with the formal justice system characterized by delays and on the other an effort to promote a less formal dispute resolution mechanism. This development is not the outcome of any juristic philosophy. Rather it was necessitated by the growth of commercial litigation needing speedy resolution, by the ever increasing volume of court work, by court dockets becoming heavier and by the judge/case ratio becoming imbalanced on account of limited resources.

In a developing country like India with major economic reforms under way within the framework of the rule of law, strategies for swifter resolution of disputes for lessening the burden on the courts and to provide means for expeditious resolution of disputes, there is no better option but to strive to develop alternative modes of dispute resolution (ADR) by establishing facilities for providing settlement of disputes through arbitration, conciliation, mediation and negotiation. In this context the legendaries of various fields i.e., commercial, administrative and legal unanimously constituted an institution to be called “International Centre for Alternative Dispute Resolution-ICADR. This institution was established in Delhi on 31st May, 1995 and registered under the Society Registration Act, 1960. It is an autonomous non-beneficial institution. The chief object of this institution is to inculcate and expand the culture of alternative dispute resolution.

In essence the system of ADR emphasizes upon:

• Mediation rather than winner take all.

• Increasing Accessibility to justice.

• Improving efficiency and reducing court delays.

The Constitution of India through Article 14 guarantees equality before the law and the equal protection of the laws. Article 39A of the Constitution mandates the State to secure that the operation of the legal system promotes justice on a basis of equal opportunity, and ensure that the same is not denied to any citizen by reason of economic or other disabilities. Equal opportunity must be afforded for access to justice. Law should not only treat all persons equally, but also the law must function in such a way that all the people have access to justice in spite of economic disparities. The expression “access to justice” focuses on the following two basic purposes of the legal system.

• The system must be equally accessible to all.

• It must lead to results that are individually and socially just.

It is one of the most important duties of a welfare state to provide judicial and non-judicial dispute-resolution mechanisms to which all citizens have equal access for resolution of their legal disputes and enforcement of their fundamental and legal rights. Poverty, ignorance or social inequalities should not become barriers to it. The workload of Indian Judiciary increased by leaps and bounds and has now reached a stage of unwieldy magnitude, which has in fact led to a large backlog of cases. Due to this ADR has become the need of the hour for Indian Judiciary. Considering the delay in resolving the dispute Abraham Lincon has once said:

“Discourage litigation. Persuade your neighbors to compromise whenever you can point out to them how the nominal winner is often a real loser, in fees, expenses, and waste of time”.

“In the same vein Judge Learned Hand commented, “I must say that as a litigant, I should dread a law suit beyond almost anything else short of sickness and of death”.

LEGISLATIVE EFFORTS IN INDIA

In Sitanna v. Viranna, AIR 1934 SC 105, the Privy Council affirmed the decision of the Panchayat and Sir John Wallis observed that the reference to a village panchayat is the time-honoured method of deciding disputes. It avoids protracted litigation and is based on the ground realities verified in person by the adjudicators and the award is fair and honest settlement of doubtful claims based on legal and moral grounds.

The legislative sensitivity towards providing a speedy and efficacious justice in India is mainly reflected in two enactments. The first one is the Arbitration and Conciliation Act, 1996 and the second one is the incorporation of section 89 in the traditional Civil Procedure Code (CPC).

The adoption of the liberalized economic policy by India in 1991 has paved way for integration of Indian economy with global economy. This resulted in the enactment of the Arbitration and Conciliation Act, 1996 (new Act) by the legislature as India had to comply with well-accepted International norms. It superseded the obsolete and cumbersome Arbitration Act, 1940. The new Act has made radical and uplifting changes in the law of arbitration and has introduced new concepts like conciliation to curb delays and bring about speedier settlement of commercial disputes. The new Act has been codified on the lines of the Model Law on International Commercial Arbitration as adopted by the United Nations Commission on International Trade Law (UNCITRAL). One of the most commendable objects of the new Act is to minimize the role of the courts in the arbitration process. The Arbitration and Conciliation Act, 1996 laid down the minimum standards, which are required for an effective ADRM.

Further, the recent amendments of the CPC will give a boost to ADR. Section 89 (1) of CPC deals with the settlement of disputes outside the court. It provides that where it appears to the court that there exist elements, which may be acceptable to the parties, the court may formulate the terms of a possible settlement and refer the same for arbitration, conciliation, mediation or judicial settlement. While upholding the validity of the CPC amendments in Salem Advocate Bar Association v. U.O.I , the Supreme Court had directed the constitution of an expert committee to formulate the manner in which section 89 and other provisions introduced in CPC have to be brought into operation. The Court also directed to devise a model case management formula as well as rules and regulations, which should be followed while taking recourse to alternative dispute redressal referred to in Section 89 of CPC. All these efforts are aimed at securing the valuable right to speedy trial to the litigants.

ADR was at one point of time considered to be a voluntary act on the apart of the parties which has obtained statutory recognition in terms of CPC Amendment Act, 1999, Arbitration and Conciliation Act, 1996, Legal Services Authorities Act, 1997 and Legal Services Authorities (Amendment) Act, 2002. The access to justice is a human right and fair trial is also a human right. In India, it is a Constitutional obligation in terms of Art.14 and 21. Recourse to ADR as a means to have access to justice may, therefore, have to be considered as a human right problem. Considered in that context the judiciary will have an important role to play.

The Supreme Court of India has also suggested making ADR as ‘a part of a package system designed to meet the needs of the consumers of justice’. The pressure on the judiciary due to large number of pending cases has always been a matter of concern as that being an obvious cause of delay. The culture of establishment of special courts and tribunals has been pointed out by the SC of India in number of cases. The rationale for such an establishment ostensibly was speedy and efficacious disposal of certain types of offences.

Industrial Disputes Act, 1947 provides the provision both for conciliation and arbitration for the purpose of settlement of disputes. In Rajasthan State Road Transport Corporation v. Krishna Kant , the Supreme Court observed: “The policy of law emerging from Industrial Disputes Act and its sister enactments is to provide an alternative dispute-resolution mechanism to the workmen, a mechanism which is speedy, inexpensive, informal and unencumbered by the plethora of procedural laws and appeals upon appeals and revisions applicable to civil courts. Indeed, the powers of the courts and tribunals under the Industrial Disputes Act are far more extensive in the sense that they can grant such relief as they think appropriate in the circumstances for putting an end to an industrial dispute.”

Section 23(2) of the Hindu Marriage Act, 1955 mandates the duty on the court that before granting relief under this Act, the Court shall in the first instance; make an endeavor to bring about reconciliation between the parties, where it is possible according to nature and circumstances of the case. For the purpose of reconciliation the Court may adjourn the proceeding for a reasonable period and refer the matter to person nominated by court or parties with the direction to report to the court as to the result of the reconciliation. [Section 23(3) of the Act].

The Family Court Act, 1984 was enacted to provide for the establishment of Family Courts with a view to promote conciliation in, and secure speedy settlement of, disputes relating to marriage and family affairs and for matter connected therewith by adopting an approach radically different from the ordinary civil proceedings . Section 9 of the Family Courts Act, 1984 lays down the duty of the family Court to assist and persuade the parties, at first instance, in arriving at a settlement in respect of subject matter. The Family Court has also been conferred with the power to adjourn the proceedings for any reasonnable period to enable attempts to be made to effect settlement if there is a reasonable possibility.

Shri M.C.Setalvad, former Attorney General of India has observed: “….equality is the basis of all modern systems of jurisprudence and administration of justice… in so far as a person is unable to obtain access to a court of law for having his wrongs redressed or for defending himself against a criminal charge, justice becomes unequal …Unless some provision is made for assisting the poor men for the payment of Court fees and lawyer’s fees and other incidental costs of litigation, he is denied equality in the opportunity to seek justice.”

WHAT ARE THE MECHANISMS OF ADR?

ADR can be broadly classified into two categories; court-annexed options (it includes mediation, conciliation) and community based dispute resolution mechanism (Lok- Adalat).

The mechanism of Arbitration and Conciliation was introduced in India through the Arbitration and Conciliation Act, 1996: Part I of this act formalizes the process of Arbitration and Part III formalizes the process of Conciliation. (Part II is about Enforcement of Foreign Awards under New York and Geneva Conventions.).

 

Arbitration: is a procedure in which the dispute is submitted to an arbitral tribunal which makes a decision (an award) on the dispute that is binding upon the parties. Arbitration generally grows when the parties through the contract agrees to resort to arbitration process, in case of disputes that may arise in future regarding contract terms and conditions. The process of arbitration can start only if there exist a valid Arbitration Agreement between the parties prior to the emergence of the dispute. As per Section 7, such an agreement must be in writing. The contract, regarding which the dispute exists, must either contain an arbitration clause or must refer to a separate document signed by the parties containing the arbitration agreement. The existence of an arbitration agreement can also be inferred by written correspondence such as letters, telex, or telegrams which provide a record of the agreement. Any party to the dispute can start the process of appointing arbitrator and if the other party does not cooperate, the party can approach the office of Chief Justice for appointment of an arbitrator. A sole arbitrator or panels of arbitrators so appointed constitute the Arbitration Tribunal. The arbitration tribunal has jurisdiction over its own jurisdiction. Thus, if a party wants to challenge the jurisdiction of the arbitration tribunal, it can do so only before the tribunal itself. If the tribunal rejects the request, there is little the party can do accept to approach a court after the tribunal makes an award. Section 34 provides certain grounds upon which a party can appeal to the principal civil court of original jurisdiction for setting aside the award. Once the period for filing an appeal for setting aside an award is over, or if such an appeal is rejected, the award is binding on the parties and is considered as a decree of the court.

Conciliation: A non-binding procedure, in which an impartial third party i.e. the conciliator or the mediator, assists the parties to a dispute in reaching a mutually satisfactory and agreed settlement of disputes. Conciliation is a less formal form of arbitration. This process does not require an existence of any prior agreement. Any party can request the other party to appoint a conciliator. One conciliator is preferred but two or three are also allowed. Parties may submit statements to the conciliator describing the general nature of the dispute and the points at issue. Each party sends a copy of the statement to the other. The conciliator may request further details, may ask to meet the parties, or communicate with the parties orally or in writing. Parties may even submit suggestions for the settlement of the dispute to the conciliator.

When it appears to the conciliator that elements of settlement exist, he may draw up the terms of settlement and send it to the parties for their acceptance. If both the parties sign the settlement document, it shall be final and binding on both.

Mediation: Mediation, aims to assist two (or more) disputants in reaching an agreement. The parties themselves determine the conditions of any settlements reached— rather than accepting something imposed by a third party. The disputes may involve (as parties) states, organizations, communities, individuals or other representatives with a vested interest in the outcome. Mediators use appropriate techniques and/or skills to open and/or improve dialogue between disputants, aiming to help the parties reach an agreement (with concrete effects) on the disputed matter. Normally, all parties must view the mediator as impartial. Disputants may use mediation in a variety of disputes, such as commercial, legal, diplomatic, workplace, community and family matters. A third-party representative may contract and mediate between (say) unions and corporations. When a workers’ union goes on strike, a dispute takes place, and the corporation hires a third party to intervene in attempt to settle a contract or agreement between the union and the corporation.

 

Negotiation: Negotiation is a dialogue intended to resolve disputes, to produce an agreement upon courses of action, to bargain for individual or collective advantage, or to craft outcomes to satisfy various interests. It is the primary method of alternative dispute resolution. Negotiation occurs in business, non-profit organizations, and government branches, legal proceedings, among nations and in personal situations such as marriage, divorce, parenting, and everyday life. Those who work in negotiation professionally are called negotiators. Professional negotiators are often specialized, such as union negotiators, leverage buyout negotiators, peace negotiators, hostage negotiators, or may work under other titles, such as diplomats, legislators or brokers.

Lok-Adalat: The Lok-Adalat system contributed under National Legal Service Authority Act, 1987 is a uniquely Indian approach. The Constitutional duty of the State to provide legal aid, prompted by the decisions of the apex court, led to the formation of a Committee for Implementing Legal Aid Schemes (CILAS). The legal legitimacy of Lok Adalat flows from the Legal Services Authorities Act, 1987. It roughly means “People’s court”. This is a non-adversarial system, where by mock courts (called Lok Adalats) are held by the State Authority, District Authority, Supreme Court Legal Services Committee, High Court Legal Services Committee, or Taluk Legal Services Committee, periodically for exercising such jurisdiction as they thinks fit. These are usually presided by retired judge, social activists, or members of legal profession. It does not have jurisdiction on matters related to non-compoundable offences. There is no court fee and no rigid procedural requirement (i.e. no need to follow process given by Civil Procedure Code or Evidence Act), which makes the process very fast. Parties can directly interact with the judge, which is not possible in regular courts. A case can be transferred to a Lok Adalat if one party applies to the court and the court sees some chance of settlement after giving an opportunity of being heard to the other party. The focus in Lok Adalats is on compromise. When no compromise is reached, the matter goes back to the court. However, if a compromise is reached, an award is made and is binding on the parties. It is enforced as a decree of a civil court. An important aspect is that the award is final and cannot be appealed, not even under Article 226 because it is a judgment by consent. All proceedings of a Lok Adalat are deemed to be judicial proceedings and every Lok Adalat is deemed to be a Civil Court. Main condition of the Lok Adalat is that both parties in dispute should agree for settlement. The decision of the Lok Adalat is binding on the parties to the dispute and its order is capable of execution through legal process. Lok Adalat is very effective in settlement of money claims. Disputes like partition suits, damages and matrimonial cases can also be easily settled before Lok Adalat. Lok Adalat is a boon to the litigant public, where they can get their disputes settled fast and free of cost.

 

HOW TO MAKE ADR SYSTEM MORE VIABLE???

We cannot stop the inflow of cases because the doors of justice cannot be closed, but we can increase the outflow of cases either by strengthening (both qualitatively and quantitatively) the capacity of the existing system or by way of finding some additional outlets.

In this situation ADR mechanism implementation can be such a drastic step for which three things are required most:

• Mandatory reference to ADRs

• Case management by Judges

• Committed teams of Judges and Lawyers

 

Equal justice for all is a cardinal principle on which entire system of administration of justice is based. We cannot conceive justice which is not fair and equal. We should aim to achieve earlier and more proportionate resolution of legal problems and disputes by increasing advice and assistance to help people resolve their disputes earlier and more effectively; increasing the opportunities for people involved in court cases to settle their disputes out of court; and reducing delays in resolving those disputes that need to be decided by the courts.

To implement the noble ideas and to ensure the benefits of ADR to common people, the four essential players (government, bench, bar litigants) are required to coordinate and work as a whole system. Case management includes identifying the issues in the case; summarily disposing of some issues and deciding in which order other issues to be resolved; fixing time tables for the parties to take particular steps in the case; and limiting disclosure and expert evidence.

• Government: Government has to support new changes. If the government support and implements changes ADR institutes will have to be set up at every level from district to national level.

• Bench: unless mindsets of the judges are changed, there will be no motivation for the lawyers to go to any of the ADR methods.

• Bar: the mindset of the members of the Bar is also to be changed accordingly otherwise it would be difficult it is difficult to implement ADR. The myth that ADR was alternative decline in Revenue or Alternative Drop in Revenue is now realizing that as more and more matters get resolved their work would increase and not decrease.

• Litigants: few parties are usually interested in delay and not hesitate in taking a stand so as to take the benefit if delay. Parties have to realize that at the end, litigation in court may prove very costly to them in terms of both cost and consequence.

 

SUGGESTIONS

ADR is quicker, cheaper, and more user-friendly than courts. It gives people an involvement in the process of resolving their disputes that is not possible in public, formal and adversarial justice system perceived to be dominated by the abstruse procedure and recondite language of law. It offers choice: choice of method, of procedure, of cost, of representation, of location. Because often it is quicker than judicial proceedings, it can ease burdens on the Courts. Because it is cheaper, it can help to curb the upward spiral of legal costs and legal aid expenditure too, which would benefit the parties and the tax payers. In this juncture, few things are most required to be done for furtherance of smooth ADR mechanisms. Few of them are:

 

• Creation of awareness and popularizing the methods is the first thing to be done.

• NGOs and Medias have prominent role to play in this regard.

• For Court- annexed mediation and conciliation, necessary personnel and infrastructure shall be needed for which government funding is necessary.

Training programs on the ADR mechanism are of vital importance. State level judicial academies can assume the role of facilitator or active doer for that purpose. While the Courts have never tired of providing access to justice for the teeming millions of this country, it would not be incorrect to state that the objective would be impossible to achieve without reform of the justice dispensation mechanism. There are two ways in which such reform can be achieved- through changes at the structural level, and through changes at the operational level:

• Changes at the structural level challenge the very framework itself and require an examination of the viability of the alternative frameworks for dispensing justice. It might require an amendment to the Constitution itself or various statutes.

• On the other hand, changes at the operational level require one to work within the framework trying to identify various ways of improving the effectiveness of the legal system. Needless to say, this will considerably reduce the load on the courts apart from providing instant justice at the door-step, without substantial cost being involved. This is also avoiding procedural technicalities and delays and justice will hopefully be based on truth and morality, as per acknowledged considerations of delivering social justice.

 

CONCLUSION

As is said in the practical philosophy of law that lawyers are what their cases have made them, so goes the addendum that a legal system is venerated as it has been handled and managed in course of time. Then only a legacy is left for the future to find it sufficiently germane to be accepted as a proposition of inheritance. The law and legal system should appeal the reasons of people, is not a legal principle but a common sense observation of fact. It is this spirit that has led to the evolution of ADR Mechanisms for the dispensation of justice with efficacy and steadfastness!

The Constitution of India calls upon the state to provide for free legal aid to ensure that opportunities for securing justice are not denied to any citizen by reason of economic inability. India socio-economic conditions warrant highly motivated and sensitized legal service programs as large population of consumers of justice (heart of the judicial anatomy) are either poor or ignorant or illiterate or backward, and as such, at a disadvantageous position. The State, therefore, has a duty of secure that the operation of legal system promotes justice on the basis of equal opportunity.

As per latest available information, 57,179 cases were pending in the Supreme Court of India as on 30.6.11. The number of cases pending in the High Courts were 42, 17,903 as on 30.9.2010. Shri Salman Khurshid, Minister of Law & Justice said that in order to facilitate expeditious disposal of cases in courts, Government has taken a number of measures as mentioned below:

The Government has approved setting up of ‘National Mission for Justice Delivery and Legal Reforms’. The major goals are:

• Increasing access by reducing delays and arrears in the system;

• Enhancing accountability through structural changes and by setting performance standards and capacities.

Enactment of the Gram Nyayalayas Act, 2008 which provides for establishment of Gram Nyayalayas to improve access to justice to marginalised. The current year allocation has been increased from Rs. 40 crore to Rs. 150 crore. So far 151 Gram Nyayalayas have been notified by the states. In order to computerise the justice delivery system Government is implementing e-Courts Project for the District and Subordinate Courts in the country.

The Government has accepted the recommendations of the Thirteenth Finance Commission to provide a grant of Rs. 5000 crore to the States for improving the justice delivery system in the country over a five year period 2010-15. With the help of these grants, the States can, inter-alia, set up morning / evening / shift / special magistrates’ courts, appoints court managers, establish ADR centres and provide training to mediators / conciliators, organise more Lok Adalats to reduce pendency. The grants also provide for training of judicial officers, strengthening of State Judicial Academies, and training of public prosecutors and maintenance of heritage court buildings.

Former Minister of Law and Justice, Veerappa Moily announced the ‘National Litigation Policy’ (NLP) to reduce the average time of pending cases in India. The NLP aims at reducing government litigation in courts. Launching the NLP to make government an “efficient and a responsible” litigant, Moily said, “Monitoring and review mechanism proposed under it would prevent delay or neglect of important cases such as the Bhopal gas tragedy.” The Law Minister had in October 2009 released a vision statement at a two-day conference on National Consultation for Strengthening the Judiciary towards Reducing Pendency and Delays to reduce the backlog of cases. However, some of the suggestions laid out in the vision statement have not been included in the NLP such as introduction of night courts, appointment of judges on a contractual basis and establishment of a National Arrears Grid.

Mahatma Gandhi had put in correct words as:

“I had learnt the true picture of law. I had learnt to find out the better side of human nature and to enter men’s heart. I realized that the true function of a lawyer was to unite parties riven asunder. The lesson was so indelibly burnt into me that a large part of my time during the twenty years of my practice as a lawyer was occupied in bringing about private compromised of hundreds of cases. I lost nothing thereby not even money certainly not my soul.”

In the days of “time being money”, even in games like cricket, we have drifted towards one day, limited over matches instead of the five days, two inning matches. Arbitration, as practiced in India, instead of shortening the lifespan of the dispute resolution, became one more “inning” in the game. Not only that, the arbitrator and the parties’ lawyers treated arbitration as “extra time” or overtime work to be done after attending to court matters.

The disillusionment and frustration of people over the inordinate delay in dispensation of justice today looms large as a great threat to erode the confidence of people in the justice system of the country. It is the constitutional obligation of the judiciary to exercise its jurisdiction to reaffirm the faith of the people in the judicial set up. Therefore, evolution of new juristic principles for dispute resolution is not only important but imperative.

REFERENCES

 

• Alternative Dispute Resolution: Negotiation and Mediation, Madabhushi Sridhar, Lexisnexis Butterworth, Wadhwa Nagpur.

 

 

• Arbitration & ADR (An essential revision aid for Law Students), Universal Law Series, Universal Law Publishing Company Ltd.

• The Law and Practice of Arbitration and Conciliation by O.P.Malhotra & Indu Malhotra

Lexisnexis, Butterworth, Wadhwa Nagpur.

• Law of Arbitration and Conciliation, Avtar Singh, 2006, Eastern Book Company Ltd.

• Alternative Dispute Resolution: What it is and how it works, (Reprint), Rao P.C. & William Sheffield, Universal Law Publishing Company Ltd.

• Arbitration Agreements & Awards (2nd Edn.), Bansal Ashwinie Kumar , Universal Law Publishing Company Ltd.

• Arbitration Business & Commercial Laws, Lakshmanan AR , Universal Law Publishing Company Ltd.

• International Commercial Arbitration & Its Indian Perspective, Sethi & Gupta , Universal Law Publishing Company Ltd.

• Commentary on the Arbitration and Conciliation Act, (Introduction by Fali S. Nariman), 5th Edn., Malik Justice S.B , Universal Law Publishing Company Ltd.

• Textbook on Arbitration & Conciliation with Alternative Dispute Resolution, 2nd Edn., Saharay Madhusudan , Universal Law Publishing Company Ltd.

• Mediation Practice and law, Sriram Panchu, Lexisnexis Butterworth, Wadhwa Nagpur.

• Law Commission of India, 188th Report on Proposals for Constitution of Hi-Tech Fast – Track Commercial Division in High Courts December, 2003.

• Law Commission of India, 76th Report on Arbitration act, 1940, November, 1978.

• Law Commission of India, 114h Report on Gram Nyayalayas, August 1986.

• Law Commission of India, 215th Report on L. Chandra Kumar be revisited by Larger Bench of Supreme Court

• Law Commission of India, 221st Report on Need for Speedy Justice – Some Suggestions, April, 2009.

• Law Commission of India, 222nd Report on Need for Justice-dispensation through ADR etc, April, 2009.

PUBLIC POLICY SETTING ASIDE ARBITRAL AWARD

Vivek Kerketta

Introduction

Public policy is an attempt by the government to address a public issue. The government, whether it is city, state, or federal, develops public policy in terms of laws, regulations, decisions, and actions. There are three parts to public policy-making: problems, players, and the policy.

The problem is the issue that needs to be addressed. The player is the individual or group that is influential in forming a plan to address the problem in question. Policy is the finalized course of action decided upon by the government.

It is this lack of definition and certainty of the concept which has led to judicial statements against the extension of public policy. The doctrine of public policy is somewhat open-textured and flexible, and this flexibility has been the cause of judicial censure of the doctrine. By far, the most famous expression of disapproval against public policy is its description as a ‘very unruly horse’ which ‘you never know where it will carry you’.

Other expressions of disdain include descriptions such as “a treacherous ground for legal decision” and “a very unstable and dangerous foundation on which to build until made safe by decision”. However, in the second half of the 20th century, the positive function of the court in matters of public policy increasingly gained recognition. In fact, Lord Denning stated, “With a good man in the saddle, the unruly horse can be kept in control. It can jump over obstacles. It can leap the fences put up by fictions and come down on the side of justice.”

The public policy in relation to international commercial arbitration is that The UNCITRAL Model Law Commission stated in its report that the term “public policy” comprises “fundamental principles of justice”. It was understood that the term public policy which was used in the 1958 New York Convention and many other treaties, covered fundamental principles of law and justice in substantive as well as procedural respects. Thus, instances such as corruption, bribery, or fraud and similar serious cases would constitute a ground for setting aside an award.

 Public Policy for India

Public Policy

“It is never argued at all, but when other points fail” said by Burrough. J

The 1996 Act S. 34(2) (b) (ii) provides that if the award is in conflict with public policy of India it can be set aside. However the term “public policy” has not been defined anywhere in the act. Simplistically speaking, the expression “public policy” connotes some matter which concerns the public good and public interest. An attempt to define public policy was made by Winfield when he identified it as “a principle of judicial legislation or interpretation founded on the current needs of the community”. However, current needs being a changing concept, it is impossible to pigeon hole the same.

There are two conflicting positions with respect to ‘public policy’ which is especially witnessed in English decisions, usually referred to as the ‘narrow view’ and the ‘broad view’. According to the ‘narrow view’, courts cannot create new heads of public policy while the ‘broad view’ permits judicial law making. Indian courts over the years, till the infamous ONGC verdict has been inclined towards a narrow interpretation of the term public policy.

Public Policy means the principles and standards regarded by the legislature or by the court as being of fundamental concern to the State the whole of the society. The Supreme Court attempted by the following explanation of the concept:

The phrase “public policy of India” occurring in section 24(2) (b) is not defined in the Arbitration Act. The concept ‘public policy’ is considered to be vague, susceptible to narrow or wider meaning in the context in which it is used. Hence, it should be given meaning in the context and also considering the purpose of the section.

According to section 23 Indian Contract Act state that- What considerations and objects are lawful and what not – “The consideration or object of an agreement is lawful, unless -It is forbidden by law or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.”- In Gurmukh Singh v. Amar Singh , demonstrated that the agreement between appellant and the respondent was only to participate an action of evacuee property. There was no intention either to bring down the price or to defraud the government to sell the same at lower price. Therefore the object of the agreement was not opposed to public policy, a priori, it was not valid under section 23 of the Indian Contract Act.

The act does not define the expression ‘public policy’ opposed to public policy of a particular government. It connotes same matter which concerns public good and interest. The phrase ‘public policy of India used in section 34 in context is required to be given a wider meaning. The concept of public policy connotes some matter which concerns public good and public interest. What is for public good or interest or what would be injurious or harmful to public good or interest has varied from time to time. An award which is, on the face of it, patently in violation of statutory provision cannot be said to be public interest.

Setting Aside of Arbitral Award and Relation with Public policy

In the Arbitration and Conciliation Act, 1996, provides as:-

a. Section 34 (2) (b) (ii) states that arbitral award may be set aside or remitted to the arbitral tribunal for reconsideration by the country if it finds that Arbitral Award is in Conflict with public policy of India. It further explains that an award is conflict with public policy with Public Policy of India if the making of award was induced or affected by fraud, corruption or was violation of section 75 or 81

b. Section 48 (2) (b) enforcement of foreign arbitral award as defined article 44 of (New York Convention Award)may be refused if court finds enforcement would be contrary to the Public Policy of India. The provision also explains that an award is in conflict with Public Policy of India if it was induced or affected by fraud or corruption.

c. Section 57 (1) (e) also states that order that foreign award as defined article 53 (Geneva Convention Award) may be enforceable, it shall be necessary that the enforcement of is not contrary to Public Policy or Law of India.

The enforcement of an award as to be refused as being contrary to public policy if it is contrary to the fundamental policy of Indian law, country’s interest and its sense of justice and morality.

 Ground for aside Arbitral Award:

Fraud- The term ‘fraud’ has been defined in section 17 of the Indian Contract Act 1872, which reads as:

Fraud means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, which intent to deceive another party thereto or his agent, or to induce to enter into the contract-

– The suggestion, as to a fact, of that which is not true by one who does not believe it to be true.

– The active concealment of a fact by one having knowledge or belief of the fact.

– A promise made without any intention of performing it.

– Any other act fitted to deceive.

Explanation- Mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud, unless the circumstances of the case are such that regard being had to them, it is the duty of the person keeping silence to speak, or unless his silence is in itself, equivalent to speech.

Fraud is a term that should be reserved for something dishonest and morally wrong and such wrong, and much mischief is done as well as much pain inflicted by its use where ‘illegally’ and ‘illegal’ are the real appropriate expression. Chief Justice Edward Coke said, ‘fraud avoids all judicial acts ecclesiastical or temporal. Fraud however is inconsistent with claim of right made in good faith to do the act complained of.

The decision of Supreme Court in SP Chengalvaraya Naidu v. Jagannth, provides an example where it set aside a decree obtained by a party concealing a vitally relevant document from trail court. Here, a plaintiff had obtained the preliminary decree for partition of property, without disclosing to the trail court the release deed with respect to the property executed by him in favour of his employer. The court held that non-disclosure of the release deed before the court was tantamount to plain fraud on the court vitiating the decree.

Corruption-

The Explanation to section 34(2) (b) (ii), clarifies that an award induced or affected by corruption in addition to fraud will be liable to be set aside as being in conflict with the public policy of India. The expression ‘corruption’ has been defined either in the Indian Contract Act, 1872. Corruption of an arbitrator means ‘moral obliquity’ it is a false and misleading metaphor to speak of an arbitrator honest mistake, whether it is of excess or defect, as ‘constructive corruption.’ There is a general principle of law that a domestic award or a foreign award which is induced or affected by corruption, is invalid as well as unenforceable and it cannot sanctioned by the courts.

It is not easy to define corruption, it is not necessary that the arbiter should have been bribed, nor is it necessary that there should be some other form of venality or gross immorality or flagitious conduct.

In Air Corporation Employees Union v. DV Vyas the high court pointed out that the hospitality of the Corporation accepted by the Chairman could not be considered to be formal or niggardly not merit attention. Chandrachud, J said that ‘courts have always zealously upheld the principles that it is not merely sufficient that justice is done but that justice must seem to be done. Though the word ‘corruption’ was not used, the award was quashed for the mere fact that this type of hospitality was accepted.

Confidentially-

Under section 75 of the Arbitration and Conciliation Act, 1996, this provides that ‘now standing anything contained in any other law for the time being in force on India, the conciliator and the parties shall keep confidential all matters relating to the conciliation proceedings.

The provision of this section extended to the application of public policy of India in section 34(2) (ii), the explanations to which for the Avoidance of any doubt, declares that without prejudice to the generally of the expression ‘public policy of India’, if an award inter alia, is in ‘violation of section 75 of the 34(2) (ii), the words ‘conciliator’ and ‘conciliation’ used in section 75 shall have to be substituted for the words ‘arbitrator’ and ‘arbitration.’

Domestic arbitration’ of international commercial arbitration’ is not a public affair; it is essentially a process of private nature. In the language of Stephen Bond, J said- ‘the users of international commercial arbitration, i.e. the companies governments and individuals who are parties in such case, places the highest value upon confidentially as a fundamental characteristic of international commercial arbitration. The features of international commercial arbitration which attracted parties to it, as opposed to litigitation, confidentially of the proceedings and the resulting award would not enter into the public domain were almost invariably mentioned’.

Inadmissibility of evidence in other proceedings-

The explanation to section 34(2) (b) (ii), by reference the provision of section 81 in it. The provision mandates; ‘the parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is subject of the conciliation proceedings-

– Views expressed or suggestion made by the other party in respect of a possible settlement of the dispute.

– Admission made by the other party in the course of the conciliation proceedings.

– Proposals made by the conciliator.

– The fact that the other party had had indicated his willingness to accept a proposal for settlement made by the conciliator

Thus, without prejudice to the generally of the expression ‘public policy of India’ as used in section 34(2) (ii), an award is in conflict with the public policy of India’, if it is violation of the provision of section 81 of the Act.

Misconduct- Section 30 of the Arbitration Act, 1940 provided that an arbitral award was liable to set aside where ‘an arbitrator or umpire has misconduct himself or the proceedings’. Though the term ‘misconduct’ was not defined in that Act, nevertheless misconduct, as crystallized by the judicial decision, covered a wide range of errors on the parts of the arbitrator.

“An award can be set aside for misconduct if the arbitrator has received bribes, or if he is secretly interested in the subject matter of the dispute. Misconduct may exist where no improper motives are imputed to the arbitrator. It is misconduct, for example, to make an award on a illegal contract.”

Misconduct was before the Supreme Court in V.G.Gorege v. Indian Rare Earths Ltd, a case of misconduct exists where the amount awarded by the arbitrator is contrary to his findings.

“The arbitrator may be a most recpectable person, but even so, his conduct cannot be reconciled to general principles. A judge must not take upon himself to say whether evidence improperly admitted had or had not any effect upon his mind. The award may have done perfect justice, but upon general principles it cannot be supported.

Legislatative Perspective

The Principle of public policy has been stated by Lord Mansfield in Holman v.Johson in following language:

The principle of public policy is this: ex dolo malo non oritur actio. No court will lend its aid to a man who founds his cause of action upon immoral or illegal act. If from the plaintiff own stating or otherwise, the cause of action appear to arise ex trupi causa, or the transgression of positive law of country, there the court says he has no right to be assited.

Public policy targets protection and promotion of public welfare. It is the principle of, under which freedom for contract or private dealings is restricted by the law for the good of community.

The general concept of public policy comprehends a wide range of topics categorized under certain heads. Agreement may offend against public policy by tending to prejudice of state in time of war (trading with enemies, etc), by tending to the perversion or abuse of municipal justice or in private life by attempting to impose inconvenient and unreasonable restriction on free choice individual marriage or their liberty to exercise any lawful trade or calling.

In the Indian constitution also in preamble it is well said “WE, THE PEOPLE OF INDIA, having solemnly resolved to constitute India into a SOVEREIGN SOCIALIST SECULAR DEMOCRATIC REPUBLIC and to secure to all its citizens: JUSTICE, social, economic and political; LIBERTY of thought, expression, belief, faith and worship; EQUALITY of status and of opportunity; and to promote among them all FRATERNITY assuring the dignity of the individual and the unity and integrity of the Nation.”

The Sovereign, Socialist, Secular, Democratic, Republic all this status comes only when good policy is formed and its enacted by the Government. The American President George Washington said- By the people, for the people, of the people, the public policy should be made in such a way that it benefits or works for the people only. It must be made for interest of the society.

Under Indian Constitution the Fundamental Right in Right to Freedom article 19 (4) restrict the right of the individual if the any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the sovereignty and integrity of India or public order or morality, reasonable restrictions on the exercise of the right conferred by the said clause.

Thus fundamental right can also be restricting if the public policy is against the interest of the society or individual because it disturb and violates the sovereignty and integrity of a country. So the policy must be made by seeing or needs the rights and duties of the individual and society.

The section 23 says that the consideration or object of an agreement is lawful, unless- It is forbidden by law or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent, of involves or implies, injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.

Therefore, the contract i.e. (agreement) between the parties should be made in such way that it does not oppose the public policy which hampers the interest of the society and individual.

 

 Judicial Intervention

The Indian legislature and judiciary have a fundamental choice to make- to respect party autonomy and finality of arbitral awards as envisaged by the 1996 Act or impose judicial supervision on arbitration and revert to the days of the 1940 Act. This choice will shape the course of Indian arbitration for the next decade and beyond.

In recent years, all over the world, a shift has been encouraged from litigation to alternative methods of dispute resolution such as arbitration, mediation, and conciliation etc., in an attempt to overcome the problem of inordinate delay in disposal of cases that litigation entails. In India especially, the attempt of the parliament which aims to bringing about cost-effective and expeditious resolution of disputes and further preventing multiplicity of litigation by giving finality to an arbitral award.

Prior to the enactment of the 1996 Act there was widespread discontent over the excessive judicial intervention allowed by its predecessor, the 1940 Act. The 1940 Act permitted courts to set aside an arbitral award where “the award had been improperly procured or otherwise invalid.”

The 1996 act attempted to rectify this problem by limiting the basis on which awards could be challenged to a few narrow grounds (which mirrored those found in the UNCITRAL model law and New York Convention on the Recognition and enforcement of Foreign Arbitral Awards).

The recent decision of the Apex Court in ONGC vs. Saw Pipes where a broad interpretation was given to the expression ‘public policy’, has given an unexpectedly different dimension and direction to S. 34. The objective behind this research is to examine the merits of having a broader notion of public policy in connection with setting aside arbitral award and also to look into the possible problems that could crop up due to this, especially the effect on finality of arbitral awards.

In case where the validity of the award is challenged, there is no necessary of giving a narrower meaning to the term “public policy of India”. Om the contrary, wider meaning is required to be given so that a “patently illegal award” may set aside.

Principles lay down under Section 34 states that an award may be set aside if it is contrary to:-

• Fundamental policy of Indian law,

• The interest of India,

• Justice or morality,

• If it is patently illegal.

In Renusagar Power Plant Co. Ltd. v. General Electric Co. the court in view of the absence of a workable definition of “international public policy” found it difficult to construe the expression “public policy”. In the Renusagar case, while giving narrow meaning to the expression ‘public policy of India’ the Apex Court observed that “It is obvious that since the Act is calculated and designed to subserve the cause of facilitating international trade and promotion thereof by providing for speedy settlement of disputes arising in such trade through arbitration, any expression or phrase occurring therein should receive, consisting with its literal and grammatical sense, a liberal construction.”

The court further declared “patent illegality” to mean that the award is contrary to the substantive provisions of law or the provisions of the 1996 Arbitration Act or against the terms of the contract. Thus “error of law” was now included as a ground to set aside the award, thereby making the provision of S. 34 an appellate provision rather than one to be used as an application to set aside the award. In order to justify adding “error of law” as a ground to set aside the award, in light of a contrary precedent in place, the court distinguished between the two cases on the ground that while Renusagar was dealing with a foreign arbitral award, the award in the instant case is a domestic one and thus “error of law” could be used as a ground to set it aside. In light of this reasoning, it can be safely assumed that the court did not intend S. 34 to apply to foreign arbitral awards and the separate provision provided in the Act i.e. S. 48 was to apply in these circumstances

The Supreme Court distinguished Oil & Natural Gas Corporation Ltd v. Saw Pipes Ltd. from that of Renusagar Power Co. Ltd v. General Electric Co. on the ground that the Renusagar judgment was in context of a foreign award, while the ratio of SAW Pipes would be confined to domestic awards only.

The most recent decision of the Supreme Court on the subject of setting aside an award on the ground of public policy under Section 34 is Venture Global Engineering Vs. Satyam Computer Services Ltd. Based on the earlier judgment in Bhatia International v. Bulk Trading S.A. and Anr., the Supreme Court in this case held that it is open to the parties to exclude the application of the provisions of part I by express and implied agreement, failing which the whole of part I would apply.

The Supreme Court in its judgment of ONGC v. Saw Pipes Ltd has ruled that an arbitral award can be challenged under Section 34 of the 1996 Act on the ground that it violates the public policy of India, inter alia, because it is contrary to the fundamental policy of Indian Law, justice and morality or is ‘patently illegal’.

The arguments against setting aside awards based on an expansive reading of “public policy” turn on questions of the importance of party-autonomy and minimal judicial interference. It is on this basis that the decision in ONGC v. Saw Pipes has been heavily criticized. However, a refusal to set aside an illegal award under the guise of party autonomy effectively mean that parties are allowed to do indirectly what they cannot do directly.

This was in contrast to the Apex court’s observations in Narayan Prasad Lohia v. Nikunj Kumar Lohia wherein it was held that if an award was in accordance with the agreement of the parties, it may not be set aside by the court. But, as per the ONGC case, the award must be in accordance with the agreement of the parties and the agreement of the parties must lie within the parameters prescribed by the non-derogable provisions of Part I. If the award does not meet the said criteria, it may be set aside, via Section 34(2)(a)(v) read with Section 28(1)(a) of the Act.

Renusagar was a case of private international law involving enforcement of a New York Convention foreign arbitral award governed by the Foreign Awards (Recognition and Enforcement) Act, 1961 of India which was based on the principle of speedy enforcement of arbitral awards with minimum court interference..

The court in Venture Global Engineering vs. Satyam Computer Services Ltd. wherein the court held that it is permissible to set aside a foreign award in India by applying the provisions of S. 34 of Part I of the Act i.e. it held that unless otherwise agreed upon by the parties, Part I of the act also applies to foreign awards which could thus be set aside for violating Indian statutory provisions and for being contrary to Indian public policy.

 

 

 Conclusion

The scheme of the Arbitration and Conciliation Act, 1996 is very clear- to minimize court interference in the arbitral process and to ensure speedy enforcement of arbitral awards without the intervention of courts on unlimited grounds and aforementioned judgments have adopted a very strained interpretation of the Act. In such a situation to allow an expansive reading of ‘public policy’ would nullify the entire purpose. Finality being the most attractive and unique feature of arbitration has been struck at its very roots by the expansive interpretation of the term ‘public policy’ by the ONGC court, as a result of which arbitration as it now stands in India is just another step in the appeal process.

Further, the challenging of International awards and their setting aside on the ground of them being against the public policy and by applicability of Part I of the Act posses a potential threat to the basic foundation of International Commercial Arbitration. However, there are two legislative proposals before the Indian Parliament which indicate that the legislature did not intend to include “error of law” as a public policy ground under S.34 (2) (b) (ii) of the Act. Both the April 2001 Bill and December 2003 Bill, have proposed amendments to the 1996 Act as follows:

“34 A (1) In the case of an arbitral award made in an arbitration other than an international arbitration (whether commercial or not), recourse to the following additional grounds can be had in an application for setting aside an award referred to in sub-section (1) of section 34, namely–(a) that there is an error which is apparent on the face of the arbitral award giving rise to a substantial question of law …”

To sum up, it can be said: “Public Policy can be a ‘double-edged sword’ in arbitration- ‘helpful as a tool, dangerous as a weapon’.”