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THE ROLE OF ADR IN RESOLVING CORPORATE DISPUTES
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THE ROLE OF
ADR IN RESOLVING CORPORATE DISPUTES
AUTHROED BY - SANJANA BHARGAVA
Introduction
The Constitution of India based on the concept of welfare state. It is the duty of the state to secure access to justice
to its citizens by ensuring judicial and non-judicial forums of dispute
resolution that provides timely and effective justice and
enforcement of their legal and fundamental
rights. Ignorance, poverty and other social infirmities should not become barriers to securing
justice.
It is settled now that free legal aid must be provided to
the indigent person, who cannot
defend themselves in a court of law due to the reason of money and other and now it also mandatory under Article 39-A
and Article 21 of the Indian
Constitution.[1]
The law has to help the poor who do not have means to fight
their causes. The Constitutional Mandate
rescue operation began
with justice V.R. Krishna Iyer
and Justice P.N. Bhagwati’s Committee Report, weaks section thus become enable to approach law court’s right from
Munsif courts to the Supreme Court. CILAS (Committee for the implementation of Legal Aid Services)
also come on the scene. Based on this states
adopted (through state legal Aid and advice Boards) Lok Adalat.101
3.1
Constitutional Provision –
3.1.1- Preamble
Our Constitution reflects
this aspiration in the Preamble
itself, which speaks about
justice in all its forms: social, economic and political. The Preamble secures
to all the citizens of India – Justice- Social,
economic, and political. The expression Justice briefly speaking its ?the and Legal Aid Camps, Family Courts, Village
Courts, Mediation Centres, Commercial
arbitration, Women Centres Consumer Protection Forums, etc which are but various
facets of effective
Alternative Dispute Resolution system. Constitution of India[2]
is the grund-norm of this country; it contains provisions which indicate promotion
of justice harmonious reconcilement of individual
conduct with the general welfare of
society. An act or conduct of a person is said to be just if it promotes the general well-being of the community.
Therefore, the attainment of the common good as
distinguished from the good of individuals
is the essence of justice. Legal justice is a
part of social justice. As whenever the legal justice is denied the
society gets disturbed. A legal
system is part of state which maintains social
harmony through dispute resolution. In a country, which aims to protect the socio-economic and cultural rights of citizens,
it is extremely important to quickly dispose
the cases in India, as the Courts
alone cannot handle the huge backlog
of cases. This can be effectively achieved
by applying the mechanisms of Alternative Dispute Resolution.
3.1.2
Article 21 of the Constitution
of India
Article 21 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 word ?life and liberty? are not to be read narrowly it is very wide in its sense.
In Hussainara Khatoon
I Vs. Home Secretary, Bihar[3] it has been interpreted
that right to speedy trial is also a part of the right to life and personal
liberty. The Supreme
court has allowed
Article 21 to stretch aims as
wide as legitimately can.
The reason of this liberal interpretation was very simple
that Article-21 is to redress
that mental agony, expenses and strain which a person proceeded
against in litigation has to undergo and which, coupled with delay, may result in impairing the
capacity or ability of the accused to defend
himself.
The same has received recognition from the legislature as
well as in the form of introduction
of Alternative Dispute Resolution and Alternative Dispute Resolution Mechanism
through various statutes.
3.1.3
Article 39-A Free Legal Aid
Article 39-A obligates the State of secure that ?the operation of the legal system which promotes justice, on a
basis of equal opportunity, and shall, in particular, provide free legal aid, by suitable legislation or schemes or in
any other way, to ensure that opportunities for securing justice are not denied
to any citizen by reason of economic or other disabilities. Thus promotion of justice is most
important function of a state and ADR mechanisms helps in it. Hence much legislation like
Arbitration and Conciliation
Act 1996 ; Section 89 of CPC ; Legal Services Authority Act 1987 have been passed
to promote justice.[4]
3.2
Legal Provisions related to ADR -
?The first Commandment to our legislative freedom fighters ought to be to bury these codes and the Evidence Act
but re-create a simple, spacious, modern,
and business management oriented code with scope for judicial initiative in doing justice to
the people.?
…….Justice Krishna Iyer
In India Arbitration since end of nineteenth century
was a statutorily recognized form
of dispute resolution. The arbitration was originally
governed by the provisions contained in different enactments, including those in the Code of Civil
Procedure; the first India Arbitration Act was enacted in 1899, which was replaced by the Arbitration Act 1940. So Arbitration as an alternative to litigation was a recognized concept. But arbitration under this Act suffered the same
maladies like courts as it allowed
parties in every trivial matter resort to courts and ultimately frustrate the objective of arbitration as an alternative to litigation. In Guru Nank
Foundation V. Rattan Singh[5] the Supreme Court of India while referring to the 1940
Act, observed that “the way in which the proceedings under the Act are conducted
and without an exception challenged in courts has made lawyers
laugh and legal philosophers weep” in view of “ unending prolixity
at every stage providing
a legal trap to the unwary.” The Supreme Court made further observation in Food Corporation of India. V. Joginderpal[6]
that the law of arbitration must be
simple less technical and more responsible to
the actual reality of situations, responsive to the canons of justice
and fair play.
There are several
statutes recognized Alternative Dispute Resolution Mechanism
such are –
3.2.1
Civil Procedure code 1908
(i)
Section 89. Settlement
of disputes outside the Court.
–
(1)
Where it appears to the court that there exist elements
of a settlement which may be acceptable to the parties, the court
shall formulate the terms of
settlement and give them to the parties for their observations and after receiving
the observations of the parties, the court may reformulate the
terms of a possible settlement and refer the same for –
(a)
arbitration ;
(b)
conciliation ;
(c)
Judicial settlement including settlement through Lok Adalat
; or
(d)
mediation.
(2)
Where a dispute has been referred
–
(a)
for
arbitration or conciliation, the provision of the Arbitration and Conciliation Act, 1996 (26
of 1996) shall apply as if the
proceedings for arbitration of conciliation were referred
for settlement under the provision
of that Act;
(b)
to Lok Adalat, the court shall refer
the same to the Lok Adalat in accordance with the provisions of sub section
(1) of section 20 of the
legal Services Authority Act, 1987 (39 of 1987)
and all other provisions of that Act shall apply in respect of the dispute to referred to the Lok Adalat;
(c)
For judicial settlement, the court
shall refer the same to a suitable
institution or person and such institution or person shall be deemed to be a Lok Adalat and all the provisions of the Legal Services Authority Act, 1987 (39
of 1987) shall apply as if the
dispute were referred to a Lok Adalat under the provision
of the Act;
(d)
for mediation, the court shall effect
a compromise between the parties
and shall follow such procedure
as may be prescribed.
Section 89 lays down that whereby it appears to the court that there exists element of settlement, which
may be acceptable to the parties, the
Court shall formulate the terms of the settlement and give them to the parties
for their comments.
On receiving the response from the parties,
the Court may formulate the possible settlement and refer it to either:- Arbitration, Conciliation ; judicial
Settlement including settlement through Lok Adalats : or Mediation.[7] In
Salem Advocates Bar Association
V. U.O.I,[8] the Supreme Court 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 ADR referred
to in section 89 of CPC.
(ii)
Order X Examination of party by the Court
Rule 1. Ascertainment whether allegations in pleadings
are admitted or denied. At first
hearing of the suit the Court shall ascertain from each party or his pleader whether
he admits or denies such allegations of fact as are made in plaint or written
statement (if any) of the opposite party, and
as are not expressly or by the necessary implication admitted or denied by the party against whom they are
made. The Court shall record such admissions and denials.
1A. Direction of the Court to opt for any one mode of
alternative dispute resolution. –
After recording the admissions and denials, the Court shall direct the parties to the suit to opt
either mode of the settlement outside the Court as specified
in sub-section (1) of section
89. On the option of the
parties, the Court shall fix the date of appearance before such forum
or authority as may be
opted by the parties.
1B. Appearance before the conciliatory forum or authority.
Where a suit is referred under
rule IA, the parties shall appear before such forum or authority for
conciliation of the suit.
1C. Appearance
before the Court consequent to the failure of efforts of conciliation Where a suit is referred under rule IA and the
presiding officer of conciliation
forum or authority is satisfied that it would not be proper in the interest of justice to proceed with the matter
further, then it shall refer the
matter again to the Court and direct the parties to appear before
the Court on the date fixed by it.114
(iii)
Order XXXII 32(A)
Order
32(A) Lays down
the provision
relating to
?suits relating to matter concerning the family?. It is generally
the commonly accepted view
that regular court procedure may not be ideally suited to deal with the sensitive area of personal
relationships. Litigations involving affairs of the family seem to require special approach in view of the
serious emotional aspects involved. With this objective
in mind family counseling as a method of achieving
the object of preservation of family is necessarily
required to be encouraged in family and matrimonial disputes. Therefore,
Order 32A seeks to highlight
the need for adopting
a different approach where matters concerning the family are at issue, including the need for effort to bring about
amicable settlement. The provisions
of this Order applies to all proceedings relating to family, like guardianship, custody
of minor, maintenance, wills succession, etc., Rule
3 imposes a duty on the Court to make an effort of settlement by way of providing
assistance where it is possible
to do so. The Court may also adjourns the proceedings if it thinks
fir to enable attempt to be made to
effect a settlement where there is a reasonable possibility of settlement.
In discharge of this duty Court may take
assistance of welfare expert
who is engaged in promoting the welfare of the
family.
(iv)
Order 23 Rule 3 Compromise of suit
Here it is proved to the satisfaction of the Court that a
suit has been adjusted wholly or in
part by any lawful agreement or compromise [in
writing and signed by the parties], or where the defendant satisfies the plaintiff in respect of the whole or any
part of the subject matter of the suit,
the Court shall order such agreement, compromise or satisfaction to the recorded, and shall pass a decree in
accordance therewith [so far as it relates
to the parties to the suit, whether or not the subject matter of the agreement, compromise or satisfaction is the same as the
subject matter of the suit.
[Provide that where it is alleged by one party and denied by
the other that an adjustment or satisfaction has been arrived
at the Court shall decide
the question but no adjournment shall be granted
for the purpose of deciding
the question, unless the Court, for reason to be recorded, thinks fit to grant
such adjournment.]
[Explanation. – An agreement or compromise which is void or
voidable under the Indian Contract
Act, 1872, shall not be deemed to be lawful within
the meaning of this rule.
Order 23 Rule 3 also make a provision for making a decree on
any lawful agreement or compromise
between the parties during the pendency of the suit by which claim is satisfied
or adjusted. The scheme of Rule 3 of Order 23 proves that if the court is satisfied that a suit has been adjusted
wholly or partly by and lawful agreement or compromise, the court shall pass a decree in accordance to
that. Order 23, Rule 3 gives mandate
to the Court to record a lawful adjustment or compromise and pass a decree in term of such compromise or adjustment.
3.2.2
Family Courts Act 1984
The family courts act, (Act No. 66 of 1984) is in act to
provide for the establishment of family courts with a view to promote conciliation in, and secure speedy
settlement of dispute relating to marriage and family affairs and for matters connected therein.
(i)
Establishment of Family Courts
2.1.1 Section 3 Establishment of Family Courts.-
(1)
For
the purpose of exercising the jurisdiction and powers conferred on a Family Court by this Act, the State Government after consultation
with the High Court, and by notification,-
a.
shall,
as soon as may be after the commencement of this Act, establish for every area in
the State comprising a city or town whose population exceeds
one million, a Family Court;
b.
may
establish Family Courts for such other areas in the State as it
may deem necessary.
(2)
The
State Government shall, after consultation with the High Court specify, by notification, the local
limits of the area to which the jurisdiction
of a Family Court shall extend and may, at any time, increase, reduce or
alter such limits.
Section 4 Appointment of Judges.
(1)
The State Government may, with the concurrence of the High Court
appoint one or more persons to be the Judge or Judges, of a Family Court.
(2)
When a Family Court consists of more than one
Judge
a.
each
of the Judges may exercise all or any of the powers conferred on the Court by this Act or any other law for the time being in force;
b.
the
State Government may, with the concurrence of the High Court, appoint any of the Judges to be the Principal Judge and any other Judge to be the Additional Principal Judge;
c.
the Principal
Judge may, from time to time, make such arrangements as he may deem fit for the
distribution of the business of the Court among the various Judges
thereof;
d.
the
Additional Principal Judge may exercise the powers of the Principal Judge in the event of any vacancy in the office of the Principal Judge or when the
Principal Judge is unable to
discharge his functions owing to absence, illness or any other cause.
(3)
A person
shall not be qualified for appointment as a Judge unless he
a.
has
for at least seven years held a Judicial office in India or the office of a member of a tribunal or
any post under the Union or a State requiring
special knowledge of law; or
b.
has
for at least seven years been an advocate of a High Court or of two or
more such Courts in succession; or
c.
Possesses such other qualification as the Central
Government may. with the concurrence of the Chief Justice of India, prescribe.
(4)
In selecting persons for appointment as Judges
a.
every endeavour
shall be made to ensure that persons
committed to the need to protect and preserve that institution of marriage and to promote
the welfare of children and qualified by reason of their experience and expertise to promote
the settlement ofdisputes by conciliation and counseling are selected; and
b.
preference shall be given to women.
(5)
No
person shall be appointed as or hold the office of, a Judge of a Family
Court after he has
attained the age of sixty-two years.
(6)
No
salary or honorarium and other allowances payable to, and the other terms and conditions of service of,
a Judge shall be such as the State
Government may, in consultation with the High Court, prescribe.
Section 5 Association of social welfare
agencies, etc.-
The State Government may, in consultation with the High
Court, provide. by rules, for the
association, in such manner and for such purposes
and subject to such conditions as may be specified in the rules, with a Family Court
of
a.
institutions or organisations engaged in social welfare or the representatives thereof;
b.
persons professionally engaged in promoting the welfare of the family;
c.
persons working
in the field of social
welfare; and
d.
any
other person whose association with a Family Court would enable it to exercise
its jurisdiction more effectively in accordance with the purposes
of this Act.
Section 6 Counsellors, officers
and other employees
of Family Courts.
(1)
The
State Government shall, in consultation with the High Court, determine the number and categories of counsellors,
officers and other employees required
to assist a Family Court in the discharge of its functions and provide the Family Court with such counsellors, officers
and other employees as it
may think fit.
(2)
The
terms and conditions of association of the counsellors and the terms and conditions of service of the officers
and other employees. referred to in sub-section
(1), shall be such as may be specified
by rules made by the State
Government.
(ii)
Jurisdiction of Family Courts
-
2.2.1 Section 7
(1)
Subject
to the other provisions of this Act, a Family Court shall :-
a.
have and exercise all the jurisdiction exercisable by any district Court or any subordinate Civil Court under any law
for the time being in force in respect of suits and
proceedings of the nature
referred to in the
Explanation; and
b.
be
deemed, for the purposes of exercising such jurisdiction under such law, to be a district Court or, as the case may be. such subordinate Civil Court for the area to which the jurisdiction of the Family Court extends.
Explanation – The suits and proceedings referred to in this
subsection are suits and proceedings of the following nature, namely
:-
a.
a
suit or proceeding between the parties to a marriage for decree of a nullity marriage (declaring the marriage
to be null and void or, as the case
may be, annulling the marriage) or restitution of conjugal rights or judicial
separation or dissolution of marriage;
Now it is proved all over the world that Alternative Dispute
Resolution as a mechanism of resolving dispute
by consensus in a organised manner with skills and
techniques that could be learned and used.
Alternative Dispute Resolution mechanism is in addition to courts and complement them.
Ever Method of Alternative Dispute
Resolution mechanism has their own logic,
purpose and justification. Arbitration is used definitively resolve a dispute like adjudication and
that has transpired and requires fact finding, interpretation of
contractual terms, or application of legal principles
on the other hands mediation and conciliation are often used to improve
communication between parties
especially those with pre- existing relationship, to reorient the
parties to each other and to develop future oriented
solution to broadly
defines conflicts.
The Administration of justice system in India has come
under the great stress for so many reasons mainly because of the large number of pendency
of case in courts. The large number of case filed in the court every year which has shown a tremendous
change in recent year resulting in delay and pendency
underlining the need of Alternative Dispute Resolution
methods.
In the ultimate analysis it may be
concluded that widening gap between the common people and the judicially is indeed a serious cause
of concern for all those who deal with administration of Justice. The concept of Alternative resolution of
Dispute in alternate mode should be deeply
ingrained in the minds of litigant, lawyers and the judges so as to ensure that ADR methods in desperation of justice are frequently adopted. The effective utilization of ADR
mechanism would go a long way in plugging
the loop hole which is obstructing the path of justice.
5.1.1.
Critical Analysis of Arbitration
Arbitration is the most popular
process of ADR mechanism Arbitration is legally sanction mode of
ADR. In fact arbitration is coded statute
which deals with the settlement of dispute mainly commercial and civil through arbitration in which on the
basis of consent of parties or by the order of Court, an
arbitrator or arbitrators are appointed
to make award in form of settlement according to the arbitration clause
in the agreement/contract entered
in to by the parties.
Thus, in arbitration process, third party plays the role of presiding officer
of the Court. Arbitration is
most simple, economic and speedy method of resolving dispute but there are some problem also with Arbitration which
faced by the litigants. The most practical problem
with arbitration is implementation of agreement of arbitration, because
when they pre- appointed the arbitrator they have
left no choice to go the court. The process of arbitration is also misuse in International commercial arbitration
where the arbitration agreement or the arbitration clause may stipulate sole and mixed arbitral
commission. There is no provision of appeal
against the arbitral award this is also a loop point of arbitration unfortunately the process of arbitration
is misused by companies and parties
conclusively we can say for the survive of arbitration the courts and advocates must insist on Institutional
Arbitration to save guard this wonderful
concept of dispute resolution lest it gets hijacked by expenses arbitrators and fraudulently companies.
[1]
Avtar Singh –?Law of Arbitration and Conciliation? PP 397-398, 7 Edition, Eastern
book Company, Lucknow
[2]
Narendra Kumar Constitution of India? PP.28, 250
[3]
Hussainara Khatoon
(No.) V. Home Secretary, Bihar, AIR 1979 SC 1360; Kadra Pahadiya V. State of Bihar, AIR 1982 SC 1167; Raghubir Sing
V. State of Bihar, (1986) 4 SCC 481.
See also Raj Deo Sharma V. State of
Bihar, AIR 1998 SC 3281; Common Cause, Registered Society V. Union of India, AIR 1997 SC 1539; Kartar Sing V. State of
Punjab, (1994) 3 SCC 569; Akhtari Bai V. State of M.P., AIR 2001 SC 1528 : In this case it is ruled that where matters
are not disposed of within a period of say
5 years for no fault of the
convict, they should be released on bail.
[4]
Dr. Anupam Kurlwal, An Introduction of Alternative Dispute
Resolution System page 114
[6]
AIR 1989 SC
1263
[7] Law & Practice of Alteration Dispute
Resolution in India,
a Detailed Analysis
by Anirban Chakraborty Published by Lexis
Nexis
Article Information
THE ROLE OF ADR IN RESOLVING CORPORATE DISPUTES
Authors: SANJANA BHARGAVA
- Journal IJLRA
- ISSN 2582-6433
- Published 2024/05/03
- Issue 7
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International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
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