Consensual and Adjudicatory Dispute Resolution

Every method of resolving a dispute draws its force from one of two sources. Either the parties have agreed to the outcome, or an authority competent to bind them has determined it. Consensual processes belong to the first class and adjudicatory processes to the second. The distinction runs across the whole field rather than within alternative dispute resolution alone, and it explains why a settlement cannot be imposed, why an award can be made against a party who refuses to participate, and why arbitration occupies a position of its own as a process consensual in origin and adjudicatory in operation.

1. The Two Sources of Binding Force

In consensual resolution the parties remain the authors of the outcome. The process may be assisted by a neutral, but the neutral contributes technique and not authority; if either party withholds agreement, there is no outcome. The law's contribution is to give the resulting agreement a status it would not otherwise have, by deeming it a decree or an award, so that it can be executed without a fresh suit.

In adjudicatory resolution the outcome is imposed. The decision maker hears the parties and determines their rights, and the determination binds the unwilling party as much as the willing one. The law's contribution here is to confer and to limit that authority: to define who may exercise it, on what subject matter, by what procedure and subject to what review.

The processes arranged by the degree of control the parties retain over the outcome

2. The Consensual Family

Negotiation, mediation, conciliation and the ordinary Lok Adalat form the consensual family. Their common features follow directly from the source of their authority.

• Consent operates at two stages. The parties must consent to enter the process, except where the court refers them under Section 89 of the Code of Civil Procedure, 1908 or a statute requires an attempt, and they must consent to the outcome, which no statute can dispense with.
• Withdrawal is always available. A party may decline to settle at any point without giving reasons and without penalty. Section 20 of the Mediation Act, 2023 provides for termination on a non-settlement report, and Section 24 excludes the period spent in computing limitation.
• The terms may go beyond the pleadings. A settlement may cover disputes not before the court, may include parties who consent to join, and may contain obligations that no decree could impose.
• Fairness is measured by consent, not by outcome. A settlement is not open to attack because it is improvident or one-sided. It is open to attack where the consent itself is vitiated, as Section 28 of the Mediation Act, 2023 recognises by confining a challenge to fraud, corruption, impersonation and mediation in a dispute not fit for mediation.

3. The Adjudicatory Family

Adjudication in court, arbitration and the Permanent Lok Adalat exercising its power on the failure of conciliation form the adjudicatory family. Their common features likewise follow from the nature of the authority exercised.

• The process concludes whether or not a party cooperates. Section 25 of the Arbitration and Conciliation Act, 1996 permits the tribunal to continue and to make an award where the respondent fails to communicate his statement of defence, though it may not treat that failure as an admission.
• Procedural fairness is mandatory. Section 18 requires equal treatment and a full opportunity to present the case, and a breach is a ground for setting aside the award under Section 34(2)(a)(iii).
• The decision is confined to the reference. An award on a matter beyond the scope of the submission is liable to be set aside under Section 34(2)(a)(iv).
• The outcome operates as an adjudication. It is final and binding under Section 35, it operates as res judicata between the parties, and it is enforceable under Section 36 as a decree.

4. Arbitration: Consensual in Origin, Adjudicatory in Operation

Arbitration is the point at which the two families meet, and most of the difficult questions in this branch of law arise from that meeting. The tribunal's power to decide exists only because the parties conferred it by an arbitration agreement, which Section 7 of the Arbitration and Conciliation Act, 1996 requires to be in writing. Once conferred, the power is exercised against a party who may by then be wholly unwilling. Consent supplies jurisdiction; it does not soften the adjudication that follows.

Three familiar doctrines are explained by the same duality. The doctrine of separability treats the arbitration clause as an agreement independent of the contract in which it is contained, so that the tribunal's jurisdiction survives a challenge to the contract. The principle of competence-competence in Section 16 allows the tribunal to rule on its own jurisdiction, which would be impossible if consent had to be established by a court first in every case. And the rule that an arbitral award binds only the parties to the agreement follows from the consensual source of the tribunal's power, which is why a stranger cannot be joined and why a dispute involving non-signatories fragments between the tribunal and the court.

5. Compulsion at the Threshold

A statute may compel a party to attempt a consensual process without compelling the outcome, and Indian law now does so in commercial matters. Section 12A of the Commercial Courts Act, 2015 requires a plaintiff in a commercial suit of a specified value that does not contemplate urgent interim relief to exhaust pre-institution mediation before instituting the suit.

6. Points of Distinction

7. Evaluation

The two families are not rivals; a mature system needs both. Consensual processes produce outcomes that are complied with voluntarily, cost little and preserve relationships, but they cannot resolve a dispute in which one side has no interest in resolution, and they depend on a rough equality between the parties. Adjudicatory processes resolve disputes whatever the attitude of the parties and produce authoritative statements of right, but they are slow, expensive and destructive of the relationship. The design of Indian law reflects this: consensual processes are encouraged and in commercial suits required to be attempted, adjudication is preserved as the right that stands behind them, and arbitration is offered as the bridge for parties who want a determination without a court.

8. Related Topics and Provisions