Need and Importance of Alternative Dispute Resolution

The case for alternative dispute resolution in India rests on a simple proposition. A right which cannot be enforced within a reasonable time is, for most litigants, a right that does not exist. Pendency in the courts is measured in crores of cases and delay in decades, the cost of litigation excludes a large part of the population, and the adversarial process destroys relationships that the parties may need to preserve. Alternative processes address each of these problems, and the statutes of the last four decades have been directed at making them available, enforceable and, in some situations, compulsory.

1. The Burden on the Courts

The scale of pendency is the starting point of every discussion of this subject. Figures placed before Parliament and published on the National Judicial Data Grid in recent years have shown a total pendency across all courts in the range of about 4.7 to 5 crore cases. The overwhelming share lies in the district and subordinate judiciary, which accounts for something above four crore cases; the High Courts carry in the region of sixty lakh cases, and the Supreme Court a figure that has moved between eighty thousand and a little over ninety thousand. The exact numbers change daily and should always be taken from the Grid itself, but the order of magnitude has been stable for a decade.

Approximate distribution of pendency across the three tiers, on recent official figures

Three structural features explain why the backlog persists. The first is the gap between sanctioned and working strength in the district judiciary, which has run at several thousand posts. The second is a rate of institution that broadly keeps pace with the rate of disposal, so that even a court functioning efficiently does not reduce its arrears. The third is the conduct of litigation itself: adjournments, interlocutory applications and appeals at every stage extend the life of a suit far beyond the time required to decide the questions actually in dispute. The Law Commission examined these features in its 120th Report on manpower planning in the judiciary and in its 245th Report on arrears and backlog, and concluded that an increase in judge strength alone would not clear the accumulated load.

2. Delay and the Constitutional Guarantee of Access to Justice

Delay is not merely an administrative failure. Access to justice has been held to be a constitutional right, and a system that cannot deliver a decision within a reasonable time fails the guarantee. The proposition was first established in the context of undertrial prisoners and has since been generalised.

Article 39A reinforces the point in the Directive Principles by requiring the State to secure that the operation of the legal system promotes justice on a basis of equal opportunity and to provide free legal aid so that no citizen is denied justice by reason of economic or other disability. The Legal Services Authorities Act, 1987 gives effect to that directive, and it is significant that the same statute which organises legal aid also creates the Lok Adalat. In the legislative scheme, legal aid and settlement are two aspects of a single programme of access.

3. The Grounds of Need

3.1 Speed

Every alternative process is time-bound by statute in a way that litigation is not. Section 29A of the Arbitration and Conciliation Act, 1996 requires the award in a domestic arbitration to be made within twelve months of the completion of pleadings, extendable by six months by consent and thereafter only by the court. Section 29B provides a fast track procedure with a six month limit. Section 18 of the Mediation Act, 2023 fixes 120 days for the completion of mediation, extendable by 60 days. A Lok Adalat disposes of the matters referred to it on the day of the sitting. Against a civil suit that may take years to reach judgment and further years in appeal, these are outer limits measured in months.

3.2 Cost

The cost of a contested civil suit consists of court fees, counsel's fees over a long period, the expense of witnesses and documents, and the opportunity cost of management time and of capital locked in the dispute. Proceedings before a Lok Adalat involve no court fee, and Section 21 of the Legal Services Authorities Act, 1987 requires the court fee already paid to be refunded where a case pending before a court is settled. Section 16 of the Court Fees Act, 1870, inserted in 1999, requires a refund of the full fee where a suit is settled under Section 89 of the Code. Mediation costs the fees of a single neutral over a short period. Arbitration is the costliest of the alternative processes, and where it is ad hoc and protracted it can exceed the cost of a suit, which is a qualification that must be kept in view.

3.3 Preservation of relationships

An adversarial trial requires each party to establish that the other is in the wrong, and it ends with a winner and a loser. Many disputes arise between parties who have to continue dealing with each other after the dispute is over: spouses who share the custody of children, partners in a firm, members of a joint family, a supplier and a manufacturer under a long-term contract, an employer and a workforce. In these situations the interest of both sides lies in an arrangement for the future rather than in a determination about the past, and only a consensual process can produce such an arrangement.

3.4 Suitability of the process to the dispute

Certain categories of dispute are structurally suited to settlement, and the courts have identified them. Matrimonial and family disputes, disputes between neighbours and members of the same community, partnership and business disputes between persons in a continuing relationship, consumer claims, claims arising out of motor accidents, and disputes relating to the dishonour of cheques are all cases in which the questions are narrow, the relationship matters or the amount in dispute is disproportionate to the cost of a trial. Conversely, cases involving serious fraud, prosecution for grave offences, representative actions, election matters and questions of public law are unsuited to private resolution.

3.5 Expertise

A judge decides whatever comes before him. A tribunal chosen by the parties may consist of persons with technical knowledge of the subject matter, whether that is construction, shipping, insurance, information technology or a branch of engineering. In disputes turning on technical questions, the ability to choose the decision maker shortens the process and improves the quality of the result, because the tribunal does not have to be educated in the subject through expert evidence.

3.6 The commercial and economic argument

Enforcement of contracts is one of the components on which the ease of doing business of a jurisdiction is assessed, and India's ranking on that component has historically been poor because of the time taken to enforce a commercial claim. A dependable dispute resolution framework affects the price of credit, the willingness of foreign parties to accept Indian law and an Indian seat, and the terms on which infrastructure contracts are negotiated. The Commercial Courts Act, 2015, the establishment of the India International Arbitration Centre and the successive amendments to the arbitration statute were all justified in these terms.

4. Importance in the Working of the System

The importance of these processes is measured not only by the disputes they resolve but by what they contribute to the system as a whole.

• They remove from the courts a class of cases which does not require adjudication, allowing judicial time to be spent on questions that do.
• They carry the legal system into places and communities it does not otherwise reach, through Lok Adalats, legal aid camps and the community mediation contemplated by Chapter X of the Mediation Act, 2023.
• They produce outcomes that are complied with voluntarily, because the parties have consented to them; the rate of execution proceedings following a settlement is far lower than that following a contested decree.
• They make the enforcement of small claims economically rational, which is the practical condition of access to justice for most litigants.
• They allow the use of technology in dispute resolution, through online mediation under Section 30 of the Mediation Act, 2023 and through the online dispute resolution mechanisms developed in the consumer and financial sectors.

5. The Limits of the Argument

The case for alternative processes is strong, but it is frequently overstated, and a balanced treatment must record the qualifications. These processes do not address the causes of delay in the courts, which lie in judicial vacancies, infrastructure and procedural practice. They presuppose parties who are able to protect their own interests, which is not always true where one side is an individual and the other an institution. A settlement reached in the shadow of an unaffordable trial is not always a free settlement. And a system that diverts too much of its work into private processes generates no precedent, which over time weakens the public law on which the private processes themselves depend.

6. Related Topics and Provisions