Adjudicatory and Non-Adjudicatory Alternative Dispute Resolution

The processes grouped under alternative dispute resolution divide on a single question: can the neutral decide the dispute, or can he only help the parties to decide it themselves? Arbitration, expert determination and the Permanent Lok Adalat exercising its power on the failure of conciliation are adjudicatory, because the neutral determines the rights of the parties and the determination binds them. Negotiation, mediation, conciliation, the ordinary Lok Adalat and early neutral evaluation are non-adjudicatory, because the dispute ends only if the parties agree. Almost every procedural and legal consequence in this field follows from that division.

1. The Basis of the Classification

The classification does not turn on whether a third person is involved, nor on whether the process is formal or informal, nor on whether the outcome is enforceable. A mediated settlement is enforceable as a decree under Section 27 of the Mediation Act, 2023, yet mediation is not adjudicatory; a non-binding expert opinion may be highly formal and yet decide nothing. The test is the source of the outcome. In an adjudicatory process the outcome is the determination of the neutral and binds because he has decided. In a non-adjudicatory process the outcome is the agreement of the parties and binds because they have agreed; the statute merely supplies the machinery to enforce that agreement.

The division of ADR processes by the power of the neutral, and the consequences of each branch

2. Non-Adjudicatory Processes

In these processes the neutral manages communication, identifies issues, tests the strength of positions in private and helps the parties construct terms. He has no power to impose, and his view of the merits, if he expresses one, is an opinion and nothing more.

• Negotiation. No neutral at all; the parties or their representatives settle directly, and the result takes effect as a contract or, in a pending suit, as a compromise decree under Order XXIII Rule 3 of the Code of Civil Procedure, 1908.
• Mediation. Section 3(h) of the Mediation Act, 2023 defines the mediator as a person who does not have the authority to impose a settlement upon the parties. Where the parties do not settle, the mediator submits a non-settlement report under Section 20, and the dispute stands as it did.
• Conciliation. As it stood in Part III of the Arbitration and Conciliation Act, 1996, the conciliator could formulate and reformulate the terms of a possible settlement and propose them, but the proposal bound nobody; conciliation is now conducted as mediation following the Mediation Act, 2023.
• Lok Adalat in its ordinary form. It can record a compromise and nothing else; if the parties do not agree, the record is returned to the referring court under Section 20(5) of the Legal Services Authorities Act, 1987.
• Early neutral evaluation and the mini-trial. The neutral gives a candid assessment of the merits which the parties use as a basis for negotiation; it is advisory, not determinative.

3. Adjudicatory Processes

Here the neutral hears both sides and determines the dispute. The process must therefore satisfy the requirements that attach to any determination of rights: notice to the parties, an opportunity to present the case, equality of treatment, an independent and impartial decision maker, and a decision confined to the matters referred.

• Arbitration. Section 18 of the Arbitration and Conciliation Act, 1996 requires the parties to be treated with equality and each to be given a full opportunity to present his case; Section 31(3) requires the award to state reasons unless the parties have agreed otherwise or the award is on agreed terms; Section 35 makes the award final and binding, and Section 36 makes it enforceable as a decree.
• Permanent Lok Adalat for public utility services. Section 22C of the Legal Services Authorities Act, 1987 requires the forum first to attempt conciliation; if the parties fail to reach agreement, it may decide the dispute on merits, provided the dispute does not relate to an offence which is not compoundable. Its award is final under Section 22E.
• Expert determination. A defined question, such as valuation or the quality of goods, is referred to an expert whose determination binds the parties by their contract. It is not arbitration, the determination is not an award, and it cannot be challenged under Section 34.
• Dispute board decisions and emergency arbitral orders, where the contract or the institutional rules make them binding on the parties pending the final award.
• Statutory arbitration, as under Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006, where the Facilitation Council itself takes up the dispute for arbitration on the failure of mediation.

4. Consequences of the Distinction

5. Borderline and Hybrid Situations

1. Settlement recorded as an award. Where parties settle during an arbitration, Section 30 of the Arbitration and Conciliation Act, 1996 permits the tribunal to record the settlement as an award on agreed terms, which has the same status and effect as any other award. The outcome is consensual in origin but adjudicatory in form, and it is enforceable under Section 36.
2. Med-arb. The same or a different neutral mediates first and arbitrates on failure. The difficulty is that a neutral who has received confidential information in private sessions may be disqualified from deciding, since the material was not disclosed to the other side. The answer adopted in practice is to appoint a different person for the second stage, or to use an arb-med-arb protocol under institutional rules.
3. Conciliation followed by adjudication. The Permanent Lok Adalat and the Micro and Small Enterprises Facilitation Council both conciliate first and decide afterwards. In both, the statute expressly authorises the change of role, which is what saves it from the objection just described.
4. Non-binding arbitration and evaluative processes. Where the parties agree that an opinion shall not bind unless accepted, the process is non-adjudicatory in substance whatever it is called, and the opinion is not an award.

6. Why the Classification Matters

Three practical questions are answered by it. First, whether the process can resolve the dispute without the continuing cooperation of both parties; only an adjudicatory process can. Second, what standard of procedural fairness the neutral must observe; the private caucus that is the ordinary technique of mediation would be a fatal irregularity in arbitration. Third, what remedy is available against the outcome; a settlement is attacked, if at all, on grounds going to consent, while an award is attacked only on the narrow statutory grounds and never on the merits.

7. Related Topics and Provisions