The importance of Alternate Dispute Resolution (ADR) is burgeoning day by day, in commercial disputes, both National and International level, because the Courtroom is flooded with cases. ADR means, the dispute resolution methods available for settling disputes without squandering time and money by going through the litigation process and it ensures swift results.

Section 89 of the Civil Procedure Code 1908 contains the provisions of the settlement of disputes outside the Court. It says where it appears to the Court that there exist elements of a settlement which may be acceptable to the parties, the Court shall formulate the terms of the Settlement and give them to the parties for their observations and after receiving the observation of the parties, the Court may reformulate the terms of a possible settlement and refer the same for-

(1) Arbitration

(2) Conciliation

(3) Judicial settlement including settlement through Lok Adalat or

(4) Mediation

ADR  on wooden cube with Calculator and pen

The Honorable Supreme Court in M/s. Afcons Infra. Ltd   Vs. M/s Cherian Varkey Constructions Pvt Ltd, said the following categories of cases are not suitable for ADR.

1) Representative suits under Order 1 Rule 8 CPC which involve public interest or interest of numerous persons who are not parties before the Court

2) Disputes relating to election to public offices (as contrasted from disputes between two groups trying to get control over the management of societies, clubs, associations, etc).

3) Cases involving the grant of authority by the Court after inquiry, for example, suits for grant of probate or letters of administration

4) Cases involving serious and specific allegations of fraud, fabrication of documents, forgery, impersonation, coercion, etc.

5) Cases requiring protection of Courts, as for example, claims against minors, deities and mentally challenged and suits for declaration of title against the Government.

6) Cases involving prosecution for criminal offenses.

The important methods of ADR are elucidated below

1. Arbitration

Arbitration is one of the most popular forms of ADR used in India. It means the settlement of disputes by agreement of the parties with the assistance of arbitrators. The important points of Arbitration as per the Arbitration and Conciliation Act 1996 are encapsulated below.

a) The parties in arbitration are free to determine the Procedure, language, and place of Arbitration and the arbitral tribunal shall not be bound by the Code of Civil Procedure 1908 or the Indian Evidence Act 1872, but the Limitation Act, 1963 shall apply to arbitrations as it applies to proceedings in Court.

b) The parties are free to determine the number of arbitrators and procedure for their appointment. It is pertinent to not here that, the number shall not be an even number. If the parties are not agreed on the number of Arbitrators, the arbitration tribunal shall consist of sole Arbitrator. Falling any agreement, in case of three arbitrators, each party can appoint one arbitrator and the two appointed arbitrators shall appoint the third arbitrator who shall act  the presiding arbitrator.

c) As per Section 7 of the Act, the arbitration agreement shall be in writing and it may be a separate agreement or clause in a contract.

d) As per Section 21 of the Act, unless otherwise agreed by the parties, the arbitral proceeding in a particular dispute commence on the date on which a request for that dispute to be referred to arbitration is received by the respondent.

e) The parties in arbitration can apply to a court or the arbitral tribunal for various interim measures as covered in section 9 and section 17 of the Act respectively, before or during the arbitral proceeding or after the making of the arbitral award.

f) The arbitral tribunal or a party with the approval of the arbitral tribunal may apply to the Court for assistance in taking evidence.

g) The arbitral award shall be made within twelve months from the date the arbitral tribunal enters upon a reference, and the parties may by consent, extend the time for a further period of six months.

h) The parties to an arbitration agreement, may, at any stage either before or at the time of appointment of the tribunal, agree in writing to have their dispute resolved by fast track procedure.

i) An arbitral award shall be final and binding on the parties and persons claiming under them respectively.

j) Section 34 contains provisions for setting aside the arbitral award.  An application for setting aside may be made before the Court within three months of receipt of the arbitral award. This period can be extended by the Court for a further period of thirty days in appropriate cases.

k) Section 37 and 59 of the Act covers the type of appealable orders. A second appeal shall not lie in those sections, but parties are free to prefer an appeal before the Supreme Court.

A specimen of  the arbitration agreement is given below


Whereas this agreement made and entered on this——————- day of ______ between M/s _________ a company incorporated under the Companies Act 2013 having its registered office at _________________and M/s__________ a Company incorporated under the Companies Act 2013 having its registered office at ______

Whereas M/s ______ has been carrying business of ________along with M/s______from the past _______ years

Whereas disputes have arisen between the parties in respect of the following matters, rendering it impossible to carry on the business together.

(list out the disputes or differences)

Whereas the parties agree to refer the above matter for Arbitration for obtaining  the arbitral award.


1. M/s ______appoints Mr._______ as Arbitrator and M/s______ appoints Mr. ______as Arbitrator

2. The above two Arbitrators have the power to appoint an Umpire during the period of arbitration before making the arbitral award

3. The place of the arbitration proceeding shall be at_________(name of the place)

4. The time limit for arbitration shall be as per the provisions of the Arbitration and Conciliation Act 1996

5. The provisions of the Arbitration and Conciliation Act 1996 shall apply to the extent, which is not inconsistent or repugnant, to this reference for arbitration.

6. The arbitrators may appoint any specialized person for verifying the accounts of the parties or any other purpose, subject to the approval of the parties.

7. The parties her to agree that they would furnish all evidences not limited to documents, records, digital information for arbitration.

8. The arbitrators may proceed exparte if either of the parties absents after serving reasonable notice for appearance.

9. The death or any incapacity of the arbitrators does not affect the arbitration proceedings, and parties can appoint a substitute.

10. The unanimous decision of the arbitrators shall be binding on the parties and in cases of differences the decision shall be based on the opinion of the umpire.

11. The cost of the arbitration shall be in the discretion of the arbitrators

IN WHITNESS WHEREOF the parties hereto have signed this agreement on _______day of __________(month and year) at __________(place)


1. M/s

2. M/s


2. Conciliation

Conciliation is a dispute resolution method in which the parties take a coherent approach to settle the dispute with the assistance of a third party known as conciliator. Sections 61 to 81 of the Arbitration and Conciliation Act 1996 explains the provisions applicable to conciliation proceedings.

The important provisions are encapsulated below

1. The conciliation proceeding commences, when one party sending a written notice of his intention to commence conciliation proceedings,  citing the subject and details of the dispute,  to other parties, and the other party accepts the same by writing a reply of his acceptance within thirty days or the period mentioned in the notice.

2. The number of conciliators may be one or two or three. In case of one conciliator parties appoint him on mutual consent and in case of two conciliators each party appoints one and in case of three conciliators each party appoints one and the third one is appointed by the parties, act as a presiding conciliator

3. The conciliator can request the parties in a dispute to submit a written statement describing the general nature of the dispute, their interests including all documents and evidence in support of that.

4. The conciliator shall impartially assist the parties and at any stage of the proceeding if it appears to him that there exist elements of settlement acceptable to the parties, he shall formulate the possible settlement and submit to the parties for their observations. After receiving the observations conciliator can reformulate the terms of a possible settlement and in case of request of the parties the conciliator can assist the parties to enter a written settlement agreement.

5. A conciliator shall not act as an arbitrator or as a representative or counsel of a party nor presented by the parties as a witness in any arbitral or judicial proceeding in respect of a dispute that is the subject of the conciliation proceedings.

6. of the settlement agreement, made in conciliation proceedings cannot be submitted as evidence or relied upon in any arbitral or judicial proceedings.

3. Mediation

Mediation is one of the ancient methods of dispute resolution. It is a voluntary settlement of dispute resolution through the assistance of a neutral third party called Mediator. Section 89 of the Civil Procedure Code 1908 recognizes mediation as one of the methods of settlement of dispute outside the Court. Civil Procedure—-Mediation Rules 2003 covers various provisions for Mediation. Rule 4 dealt with the qualification of mediators and rule 11 talks about procedure of mediation.  Rule 12 says the mediator is not bound by Indian Evidence Act 1872 and Civil Procedure Code 1908 but guided by the principle of fairness and justice, have regard to the rights of the parties, usage of the trade if any and nature of the dispute. Unlike Arbitration Mediation is a less formal process.

Role of the Mediator is to facilitate voluntary resolution of the dispute by the parties, and communicate the view to each party to other, assist them in identifying issues, reduce misunderstandings, clarifying priorities, exploring areas of compromise and generating options in an attempt to solve the dispute, emphasizing that it is the responsibility of the parties to take decision which affects them provided he shall not impose any terms of settlement on the parties. The parties in Mediation can hire an experienced ADR Lawyer or other experienced Mediation professional to represent them during Mediation.

Since Mediation is less formal and voluntary, parties can place their issues and various alternative solutions and can reach a mutual settlement through a structured negotiation.

Following are different types of Mediation

Mandatory Mediation – the Example of Mandatory mediation in Family Law disputes.

Court Ordered Mediation – As per section 89 of the Civil procedure Code, the court can refer certain disputes for mediation.

Private Mediation- In the Case of Private Mediation, corporate, Government Departments and any member of the general public can hire qualified people as Mediators for settlement of their disputes.

4. Negotiation

Negotiation is more flexible compared to the above three methods of ADR. It is a cooperative problem-solving method without the assistance of a third party unlike other methods of ADR. It doesn’t mean that parties cannot avail the services of professional negotiators, they can avail the services of professional negotiators to represent them while negotiating.  The success of negotiation depends abound on the preparation, planning and bargaining skills of the parties. In negotiation, parties are free to determine the procedure, place, and language of negotiation. There is no need for a third party to assist the negotiation like in other methods discussed above. It is the parties of the dispute who delve into their differences, suggest possible alternatives and discuss the problems profoundly to iron out the differences and reach a settlement.

Following are the important steps in the negotiation

1. Make proper planning for a negotiation.

2. Define the terms of differences and various alternatives of each party

3. Clarification and justification of the proposal made by each party

4. Bargaining

5. Problem-solving

6. Closure and Implementation.

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