History and Development of Alternative Dispute Resolution in India

Settlement of disputes by community bodies and by chosen arbitrators is older in India than the court system that displaced it. The history of alternative dispute resolution in this country is therefore not the history of an import, but of an indigenous practice that was narrowed under colonial rule, given statutory form in the nineteenth and twentieth centuries, and deliberately revived from the 1980s onwards as the ordinary courts came under pressure. The modern framework rests on four statutes: the Legal Services Authorities Act, 1987, the Arbitration and Conciliation Act, 1996, Section 89 of the Code of Civil Procedure, 1908 and the Mediation Act, 2023.

The principal landmarks, from the Bengal Regulation of 1772 to the Mediation Council of India

1. The Ancient and Indigenous Period

Dispute resolution in ancient India was organised in tiers, with the King's court at the apex and a series of popular courts below it. The Smriti writers describe three bodies which heard disputes among their own members before the matter could reach the royal tribunal. Yajnavalkya places them in ascending order of authority, and the arrangement is repeated by the commentators.

• Kula was the assembly of the family or kinship group, competent to decide disputes among relations and members of the same household.
• Sreni was the assembly of a guild or corporation of persons following the same trade or craft, which decided disputes between its members according to the usages of the trade.
• Puga was the assembly of persons of different trades and castes living in the same locality, competent to decide disputes among residents of the village or town.

The decision of these bodies bound the parties, and an appeal lay from the Kula to the Sreni, from the Sreni to the Puga and from the Puga to the royal court. The village panchayat performed the same function at the local level and continued to do so into the medieval and colonial periods. The character of the process was conciliatory rather than adversarial, and the person deciding was chosen for his standing in the community rather than appointed by the State.

The medieval period retained the same pattern under a different vocabulary. Islamic law recognised sulh, meaning amicable settlement or compromise, and tahkim, meaning reference to an arbitrator or hakam, and these are dealt with in the Hedaya and in the Fatawa-i-Alamgiri. Trading communities developed their own machinery: the mahajans and the chief of the trade, commonly called the chaudhary or nagarseth, decided commercial disputes among merchants according to trade custom, and these decisions were accepted because exclusion from the guild was a serious commercial penalty.

2. The Colonial Period

British administration in India did not abolish arbitration; it regulated it and progressively subordinated it to the courts. The early Bengal Regulations recognised reference to arbitration as an ordinary method of settling civil claims, and the later legislation of the nineteenth century converted it into a procedure supervised by the courts.

The Arbitration Act, 1940 governed domestic arbitration for more than half a century. It proved unsatisfactory in practice because it required the award to be filed in court and a decree to be obtained upon it, which allowed a losing party to reopen the dispute at the enforcement stage. Proceedings under it became protracted and technical, and the Supreme Court repeatedly recorded its dissatisfaction with the working of the statute.

3. The Constitutional and Legal Aid Foundation

The revival of alternative dispute resolution after independence began with the legal aid movement rather than with commercial arbitration. Article 39A was inserted by the Constitution (Forty-second Amendment) Act, 1976 and directs the State to secure equal access to justice and free legal aid. The committees chaired by Justice P.N. Bhagwati and Justice V.R. Krishna Iyer, which examined legal aid in the 1970s, recommended the organisation of camps at which disputes could be settled informally. The first such camp described as a Lok Adalat was held in Gujarat in 1982, and the practice spread through the Committee for Implementing Legal Aid Schemes before it was given statutory form.

The Legal Services Authorities Act, 1987, brought into force on 9 November 1995, created the National Legal Services Authority and the State and District Authorities, and placed Lok Adalats on a statutory footing. Section 21 gives a Lok Adalat award the status of a decree of a civil court and makes it final and non-appealable. Chapter VI-A, inserted by an amendment in 2002, established Permanent Lok Adalats for disputes relating to public utility services, with power to decide the dispute on its merits where conciliation fails.

Parallel developments extended conciliation into specific fields. The Industrial Disputes Act, 1947 had already created conciliation officers and boards of conciliation. Section 9 of the Family Courts Act, 1984 requires the court to make an effort to persuade the parties to arrive at a settlement before proceeding with the trial, and Section 23 of the Hindu Marriage Act, 1955 imposes a duty of reconciliation in matrimonial causes.

4. The Arbitration and Conciliation Act, 1996

The United Nations Commission on International Trade Law adopted the Model Law on International Commercial Arbitration in 1985 and the Conciliation Rules in 1980, and the General Assembly recommended that States give due consideration to both. India responded with a single statute covering domestic arbitration, international commercial arbitration, enforcement of foreign awards and conciliation. The legislation was first promulgated as an Ordinance in January 1996 and re-promulgated twice before the Act was passed; it received assent on 16 August 1996 and was deemed to have come into force on 25 January 1996.

The Act repealed the Arbitration Act, 1940, the Arbitration (Protocol and Convention) Act, 1937 and the Foreign Awards (Recognition and Enforcement) Act, 1961, and restructured the field. Part I governs arbitration seated in India, Part II the enforcement of foreign awards under the New York and Geneva Conventions, Part III conciliation and Part IV supplementary matters. The most significant departures from the 1940 Act were the reduction of judicial intervention to the points specified in the statute, the requirement that an award state reasons, the removal of the requirement to file the award in court, and the enforcement of an award as if it were a decree without any separate proceeding to make it a rule of court.

5. Section 89 and Court-Annexed Processes

The Code of Civil Procedure (Amendment) Act, 1999 inserted Section 89 and Order X Rules 1A to 1C, on the recommendation of the Law Commission in its 129th Report and of the Justice Malimath Committee, both of which had urged that reference to conciliation be made a normal part of civil procedure. The amendment was brought into force on 1 July 2002 after the challenge to the 1999 and 2002 amendments was decided. The provision was awkwardly drafted, and its working was settled by the Supreme Court in two stages: the constitutional challenge and the framing of model rules in the Salem Advocate Bar Association litigation, and the correction of the text and the practical guidance in Afcons Infrastructure.

6. The Cycle of Amendment after 2014

The Law Commission's 246th Report, submitted in August 2014, recommended a series of changes to the Arbitration and Conciliation Act, 1996 directed at delay, cost and the impartiality of arbitrators. Three rounds of amendment followed.

1. The Amendment Act of 2015, given effect from 23 October 2015, introduced the Fifth, Sixth and Seventh Schedules on the independence of arbitrators and the grounds giving rise to justifiable doubts, inserted Section 29A prescribing a time limit for making the award, Section 29B on fast track procedure and Section 31A on costs, confined the public policy ground under Section 34 and added patent illegality as a separate ground for purely domestic awards, and removed the automatic stay of enforcement that had followed the mere filing of a petition to set aside an award.
2. The Amendment Act of 2019, following the report of the High Level Committee chaired by Justice B.N. Srikrishna, provided for the Arbitration Council of India, for the designation of arbitral institutions by the Supreme Court and the High Courts for the purpose of appointment under Section 11, and for confidentiality under Section 42A. Section 87, inserted by this amendment to restrict the application of the 2015 changes to arbitrations commenced after that date, was struck down by the Supreme Court in Hindustan Construction Co. Ltd. v. Union of India, (2020) 17 SCC 324 as manifestly arbitrary.
3. The Amendment Act of 2021, given retrospective effect from 23 October 2015, inserted a proviso to Section 36(3) requiring an unconditional stay of enforcement where the court is satisfied that a prima facie case is made out that the arbitration agreement or the contract which is the basis of the award, or the making of the award itself, was induced by fraud or corruption, and omitted the Eighth Schedule which had prescribed qualifications for arbitrators.

Institutional development proceeded alongside. The New Delhi International Arbitration Centre Act, 2019, later renamed to establish the India International Arbitration Centre, created a national institution declared to be of national importance. The Commercial Courts Act, 2015 created a dedicated commercial judiciary, and the amendment of 2018 inserted Section 12A, which requires a plaintiff in a commercial suit that does not contemplate urgent interim relief to exhaust pre-institution mediation before filing.

7. The Mediation Act, 2023

Until 2023 mediation in India had no dedicated statute. It was practised under Section 89 of the Code, under the rules framed by the High Courts, under Section 442 of the Companies Act, 2013, under the Consumer Protection Act, 2019 and under Section 12A of the Commercial Courts Act, 2015, and the machinery for conciliation stood separately in Part III of the Arbitration and Conciliation Act, 1996. The Mediation Bill, 2021 was introduced in the Rajya Sabha on 20 December 2021 and referred to the Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice, which reported in July 2022. The Bill was passed by the Rajya Sabha on 1 August 2023 and by the Lok Sabha on 7 August 2023, and received the assent of the President on 14 September 2023.

• The Act defines mediation in Section 3(h) so as to include pre-litigation mediation, online mediation, community mediation and conciliation, thereby absorbing conciliation into the single concept of mediation.
• By Section 61 read with the Sixth Schedule it replaces Sections 61 to 81 of the Arbitration and Conciliation Act, 1996 with a new Section 61, which directs that a reference to conciliation in any other enactment be read as a reference to mediation under the new Act, with a saving for conciliation proceedings already commenced.
• Pre-litigation mediation under Section 5 is voluntary. The Bill as introduced had made it compulsory, and the change was made on the recommendation of the Standing Committee; compulsion survives only in commercial suits of a specified value under Section 12A of the Commercial Courts Act, 2015.
• Section 18 requires mediation to be completed within 120 days from the date fixed for the first appearance before the mediator, extendable by 60 days with the consent of the parties.
• Section 27 makes a mediated settlement agreement enforceable in the same manner as a judgment or decree, and Section 28 confines a challenge to fraud, corruption, impersonation and the conduct of mediation in a dispute not fit for mediation.
• The Act amends nine statutes through its Schedules, including the Indian Contract Act, 1872, the Code of Civil Procedure, 1908, the Legal Services Authorities Act, 1987, the Micro, Small and Medium Enterprises Development Act, 2006, the Companies Act, 2013, the Commercial Courts Act, 2015 and the Consumer Protection Act, 2019.

Commencement has been staged. A first set of provisions, including the definitions and the chapter on the Mediation Council of India, was brought into force on 9 October 2023. The Central Government established the Mediation Council of India by notification dated 27 August 2026 under Section 31(1), with its head office at Delhi.

8. The International Dimension

India acceded to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 in 1960, with the reciprocity and commercial reservations; the Convention is given effect by Part II, Chapter I of the Arbitration and Conciliation Act, 1996, and Chapter II preserves the Geneva Convention regime for the few awards still governed by it. India signed the United Nations Convention on International Settlement Agreements Resulting from Mediation, known as the Singapore Convention on Mediation, on 7 August 2019, the day it was opened for signature, but has not ratified it. Until ratification, a settlement agreement produced by international mediation is not enforceable in India by force of the Convention, and this remains the principal gap in the framework created by the Mediation Act, 2023.

9. Reports of the Law Commission

The legislative changes described above were preceded in almost every case by a report of the Law Commission of India. The 76th Report, 1978, examined the working of the Arbitration Act, 1940. The 129th Report, 1988, on urban litigation recommended compulsory reference to conciliation and led to Section 89. The 222nd Report, 2009, on the need for justice dispensation through alternative dispute resolution mechanisms surveyed the field as a whole. The 238th Report, 2011, dealt with the amendment of Section 89. The 246th Report, 2014, produced the 2015 amendments to the arbitration statute, and the report of the Srikrishna Committee, 2017, produced those of 2019. A draft Arbitration and Conciliation (Amendment) Bill, 2024, prepared after the report of the expert committee chaired by Dr. T.K. Viswanathan, was circulated for public consultation in October 2024 and proposes statutory recognition of emergency arbitration, audio-visual hearings and the removal of the conciliation provisions consequent on the Mediation Act, 2023. It remains a draft.

10. Related Topics and Provisions