Alternative dispute resolution

Also called: ADR · Topic: Justice Delivery: Subordinate Courts, Tribunals, Legal Aid and Judicial Reforms · NCERT: Class 11, Ch 6 "Judiciary"

Meaning

Alternative dispute resolution (ADR) means settling a dispute outside a regular court trial. The main methods are negotiation, mediation, conciliation, arbitration and Lok Adalat.

ADR matters because Indian courts have crores of pending cases. ADR is cheaper, faster and private. It also helps India's "ease of doing business", because investors want contracts enforced quickly.

Explanation

Why India needs ADR

• Pendency: crores of cases are waiting in courts, so a regular trial can take years.
• Cost: lawyers' fees and repeated hearings make court cases expensive. ADR usually costs less.
• Confidentiality: ADR happens in private. Business secrets and family matters stay out of public records.
• Party autonomy (the parties' freedom to choose): the two sides choose the process, the neutral person, the place and sometimes the law.
• Contract enforcement: India has long scored poorly on how fast contracts are enforced. A quick and certain way to settle disputes builds investor confidence.

The five methods

Method	Third party?	Who decides?	Binding?
Negotiation	No	The parties talk directly	Only if they sign a contract
Mediation	Yes, a mediator	The parties make their own deal. The mediator only helps	The signed settlement binds (Mediation Act 2023)
Conciliation	Yes, a conciliator	The parties decide, but the conciliator may propose terms	The signed settlement has the same effect as an arbitral award (s.74, 1996 Act)
Arbitration	Yes, an arbitrator or tribunal	The arbitrator decides, like a private judge	A binding award (the tribunal's final decision), enforced like a decree (s.36)
Lok Adalat	Yes, a bench of conciliators	Settlement by compromise	The award is final. There is no appeal (Legal Services Authorities Act 1987)

• Adjudicative vs facilitative:
• Arbitration is adjudicative: a third person decides the dispute.

• Mediation and conciliation are facilitative: a third person only helps the parties agree.

• Decree: a court's formal order. The state can enforce it with its power, for example by seizing property.

• Ad hoc vs institutional arbitration:
• In ad hoc arbitration, the parties arrange everything themselves.
• In institutional arbitration, a standing body runs the case. It has fixed rules, a list of arbitrators and office staff.
• India has relied mostly on ad hoc arbitration.

How courts send cases to ADR (CPC Section 89)

• Section 89 of the Code of Civil Procedure (CPC) was added in 1999 and came into force in 2002.

• If a civil court sees a chance of settlement, it can send the case to one of four routes: 1. Arbitration 2. Conciliation 3. Judicial settlement, including Lok Adalat 4. Mediation

• Step 1: check whether the case is suitable (Afcons, 2010).

• Not suitable: non-compoundable crimes (crimes that cannot be settled privately), fraud and forgery, claims against minors or persons of unsound mind, and election disputes.

• Suitable: trade and contract disputes, family and matrimonial disputes, landlord–tenant disputes and consumer disputes.

• Step 2: refer the case to the chosen method, such as a court-annexed mediation centre (a mediation centre that works inside court premises).

Time limits and limits on challenge

• Arbitration (2015 amendment): domestic arbitrations must finish in 12 months, extendable by 6 months.
• Mediation (Mediation Act 2023): 120 days, extendable by 60 days with the parties' consent [3].
• Commercial pre-institution mediation (s.12A): 3 months, extendable by 2 months [7].
• Challenging an arbitral award (s.34): only on narrow grounds. Examples are:
• a party's incapacity
• an invalid arbitration agreement
• no proper notice
• a dispute outside the arbitrator's powers
• a subject that cannot be arbitrated

• conflict with the public policy of India

• Challenging a mediated settlement agreement (MSA): within 90 days, and only for: 1. fraud 2. corruption 3. impersonation 4. a subject that could not be mediated

In the Constitution and practice

• Constitutional basis:
• Article 39A (equal justice and free legal aid) was added by the 42nd Amendment, 1976. ADR supports it.

• Courts have read the right to a speedy trial into Article 21. ADR supports this right too.

• Arbitration and Conciliation Act 1996:

• It replaced the Arbitration Act 1940 and is based on the UNCITRAL Model Law 1985 (a UN model law on international commercial arbitration).
• Part I covers domestic arbitration and arbitration seated in India. The "seat" is the legal home of the arbitration.
• Part II covers enforcing foreign awards under the New York Convention 1958.
• Part III covers conciliation.

• Section 34 lets a court set aside (cancel) an award. Section 36 lets an award be enforced like a decree. Section 37 allows an appeal against an order under s.34. Section 74 gives a conciliation settlement the status of an arbitral award.

• Amendments to the 1996 Act:

• 2015: added time limits and a model fee schedule. It narrowed "public policy", so courts cannot re-open the merits of an award. Filing a challenge no longer stops enforcement automatically.
• 2019: created the Arbitration Council of India (ACI) to grade arbitral institutions and accredit arbitrators. Its provisions have not been brought into force.
• 2021: allowed an unconditional stay (a pause in enforcement without any deposit) where the agreement or award was induced by fraud or corruption.

• Draft Amendment Bill 2024: released for public comments, with a deadline of 3 November 2024. It aims to boost institutional arbitration, cut court interference and make arbitrations finish on time [4].

• Institutional arbitration:

• The B.N. Srikrishna Committee (2017) recommended a new body to take over the ICADR.
• The NDIAC Act 2019 set up the New Delhi International Arbitration Centre as an institution of national importance.

• In 2022, it was renamed the India International Arbitration Centre (IIAC).

• Mediation Act 2023 (passed in August 2023) [3]:

• Pre-litigation mediation (trying mediation before filing a case) was compulsory in the 2021 Bill. The Act made it voluntary.
• An MSA is final and binding, and it is enforceable like a court decree.
• Proceedings are confidential [3]. Mediation can be fully or partly online.
• Community mediation handles disputes that may disturb peace among residents of an area. A panel of three community mediators hears them.
• Section 31 sets up the Mediation Council of India. It registers mediators and recognises mediation service providers [2][3].

• Its Schedule lists matters that cannot be mediated, such as claims against minors, criminal prosecution, tax disputes and third-party rights. The Central Government can amend this list [3].

• Commercial Courts Act 2015:

• The 2018 amendment cut the specified value (the minimum value for a commercial dispute) from ₹1 crore to ₹3 lakh [6].
• It also added Section 12A (Pre-Institution Mediation and Settlement). If no urgent interim relief is sought, the parties must try mediation first [6][7].

• This mediation is run by authorities under the Legal Services Authorities Act 1987 [7].

• Landmark cases:

• Salem Advocate Bar Association v. Union of India (2005): the Supreme Court upheld s.89 and approved model ADR and mediation rules.
• Afcons Infrastructure v. Cherian Varkey Construction (2010): the Court set out which cases are fit for ADR.
• Patil Automation v. Rakheja Engineers (2022): the Court held s.12A is mandatory. A suit filed without mediation must be rejected. This applies from 20 August 2022.

• Gayatri Balasamy v. ISG Novasoft (30 April 2025): the Court gave courts a limited power under ss.34 and 37 to modify an award [5].

  • Courts may sever invalid parts of an award.
  • Courts may fix computational, clerical or typographical errors.
  • Courts may modify an award only when the correction is beyond doubt [5].

• Mediation and Conciliation Project Committee (2005): this Supreme Court committee set up court-annexed mediation centres and trains mediators.

Don't confuse with

• Mediation vs conciliation: a mediator only helps the parties talk. A conciliator may also propose terms of settlement.
• Arbitration vs mediation: in arbitration, the arbitrator decides and gives a binding award. In mediation, the parties decide and the mediator imposes nothing.
• Section 12A Commercial Courts Act vs Mediation Act 2023: pre-litigation mediation is mandatory under s.12A for commercial suits without urgent relief. It is voluntary under the Mediation Act 2023.
• Lok Adalat award vs arbitral award: a Lok Adalat award is final with no appeal. An arbitral award can be challenged under s.34 on narrow grounds.

Prelims Hooks

• CPC Section 89 (added 1999, in force 2002) lists four routes: arbitration, conciliation, judicial settlement (including Lok Adalat) and mediation. Salem Advocate Bar Association (2005) upheld it.
• 1996 Act sections: s.34 sets aside an award. s.36 enforces it like a decree. s.74 gives a conciliation settlement the status of an arbitral award. Part II covers foreign awards under the New York Convention.
• Amendments: the 2019 amendment created the Arbitration Council of India, which is not yet working. The 2021 amendment allowed an unconditional stay for fraud or corruption.
• Mediation Act 2023: 120 + 60 days. An MSA can be challenged within 90 days. The Mediation Council of India is set up under Section 31 [2][3].
• Commercial courts: the specified value has been ₹3 lakh since 2018 [6]. Section 12A has a 3 + 2 month limit [7]. Patil Automation (2022) held it mandatory.
• Trap: the UNCITRAL Model Law allows no modification of awards. But Gayatri Balasamy (2025) allows Indian courts a limited power to modify them [5].

Mains Points

• ADR as a reform for pendency:
• Section 89, Section 12A, court-annexed centres and the Mediation Act 2023 move simple disputes out of courts.
• This frees judges for cases that need a decision. It also supports Article 39A and speedy justice under Article 21.

• Limit: few people use ADR. Lawyers resist it, the public trusts courts more, and there are too few trained mediators.

• Court control vs finality of awards:

• The narrow "public policy" test (2015) and the limited power to modify awards (Gayatri Balasamy, 2025) make awards more certain.
• But the fraud-based stay (2021) and court corrections may bring back delay [5].

• The draft 2024 Bill aims to reduce court interference [4].

• Mandatory vs voluntary mediation, and India as an arbitration hub:

• Section 12A shows that mandatory mediation can reduce the number of cases filed [6].
• The Mediation Act kept pre-litigation mediation voluntary to protect the right to approach a court [3].
• The IIAC, a working ACI and ratifying the Singapore Convention on Mediation (signed in 2019, not yet ratified) would build investor confidence. Today, heavy reliance on ad hoc arbitration weakens this goal.

Related concepts

• Arbitration
• Conciliation
• Mediation
• Mediation Act 2023
• India International Arbitration Centre
• Commercial courts

Read more

• Alternative dispute resolution: arbitration, conciliation, mediation and commercial courts