Online Dispute Resolution

Online Dispute Resolution: A Concept Note

What does Online Dispute Resolution entail? Here’s a detailed primer.

Digital Dispute Resolution for Decentralized Digital Commerce

ODR is the most appropriate solution for India’s ONDC, owing to its propensity to work alongside the incumbent setup and deliver quick, affordable, and enforceable outcomes.

How Can Quicker Dispute Resolution Help the Economy of a Country

ADR, including elements of ODR, will lead to improvements in court effectiveness, business environment, and trust in the legal system, culminating in the economic development of the country. Here’s how.

ODR: A Solution for MSME Woes of Delayed Payments

Given the Government’s emphasis on supporting MSMEs as the growth driver of India’s economy, ODR needs to be implemented at the earliest.

How AI-language Based ODR Can Increase Access to Justice

The importance of legal translation is of paramount importance, especially in India, one of the most linguistically diverse countries in the world.

Validity of Service via Email & WhatsApp

The Pandemic saw the Supreme Court of India take unprecedented measures by barring physical entry into the court premises. Urgent…

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Why Indian Primary Education Needs ODR As a Subject

The ongoing pandemic has brought about significant changes in how we conduct ourselves daily. Individuals have had to adapt to new protocols and behaviours to mitigate the spread of the virus. These include sanitizing one’s hands often, wearing masks in public spaces, and shifting to non-contact greetings like nodding. These adjustments have become ingrained in social etiquette, and some have even made their way into primary education teachings. This illustrates how individuals can adapt to changing circumstances and incorporate new practices into their daily lives.

Similarly, with ODR procedures gaining an audience, the current generation needs to learn the protocols relating to the same. Even beyond an ODR setting, certain etiquettes common to both ODR and online interactions are good additions to our lives. At the most basic level, the curriculum of primary education can include soft skill development such as mannerisms and protocols.

A few must-teach things to prepare the younger generation for a future with ODR are:

  • To dress appropriately for the occasion. They must know the difference between casuals, formals, and business casuals. The appropriate form of clothing for any event or occasion is a must.
  • Communicating formally, while being courteous, helps one put their point across.
  • While in an online meeting, video background ideally should not show personal spaces, and be free of disturbances. If that is not possible, then a neutral background during the video conference is acceptable.
  • One must only unmute their mic in an online meeting when it is their turn to speak. In all other situations, the mic must be on mute.
  • One must be attentive in an online set-up, with a pen and paper ready to take note of anything important.

Incorporating these basic etiquettes into primary education will prepare children for formal setups, such as for ODR. The list of mannerisms detailed above is of course not exhaustive. It must incorporate a list of dos and don’ts depending on how ODR takes shape in the future.

Acceptable behaviours in an ODR setting

The system can introduce high school students to ODR as a proper subject as a part of their curriculum. It can even facilitate this through workshops in school where they can engage with people practising in their field. This will also open up opportunities for the upcoming generation. If ODR has to become a norm in the future, the coming generation must become comfortable and confident with it. Achieving that will take education about the procedure, application, and advantages of ODR, to help make an informed decision.

High school students can receive an overview of the application and protocols of the procedure. Teachers must at the very least educate students about the protocols for parties. These acceptable behaviours fall under two categories, depending on the party to which they would apply.

The disputing parties

Presiding Authority

In situations where there is a neutral third party instead of a computer system or algorithm to adjudge the dispute, the following things must be kept in mind:

The list of etiquettes detailed above is a good place to start understanding the requirements of a formal ODR process at the school level. If children are informed about the protocols and demands of the procedure, the system can ensure that the disputing parties of the future are well-informed. This will encourage well-thought decisions regarding engaging in dispute resolution and the procedures they would engage in to resolve their disputes.

For the aforementioned reasons, ODR is evolving into a new subject for primary education in India. It is a much-needed requirement and calls for educating the masses about the subject, rather than the procedure of ODR being confined to the elite, and education starts at the school level. Thus, ODR should be introduced to the student at the primary school level.

Training the future, today

ODR is a valuable skill that can be useful in a variety of contexts. Whether it is a dispute with a business, a neighbour, or even a family member, ODR can provide a quick and effective means of resolving conflicts. By teaching students about ODR, we can equip them with the skills and knowledge they need to effectively navigate conflicts and disputes in their own lives.

Since ODR is a new aspect of dispute resolution, it is unlikely that children would be aware of the modus operandi or procedure of ODR, creating awareness about it is essential. Introducing ODR as a part of the school curriculum of primary education will not only create awareness about the procedure but also help school children become comfortable with ODR and not be intimidated by the procedure if they have to engage in it.

In conclusion, ODR can play a vital role in reducing the burden on the traditional court system and make dispute resolution more efficient, accessible, and effective. It is high time that ODR is included in the school curriculum in India so that the next generation can be ready for the digital era.

Mediation in India

Untapped Potential: Understanding the Limited Adoption of Mediation in India

Mediation offers efficient and amicable conflict resolution as an alternative to lengthy court proceedings. It involves a neutral mediator who assists parties in engaging in constructive dialogue and finding mutually agreeable solutions. Despite its effectiveness globally, mediation hasn’t been widely embraced in India, thanks to certain cultural and institutional factors.

India’s rich history includes traditional dispute-resolution mechanisms like panchayats and community elders. However, the dominance of litigation in the Indian legal system has entrenched a culture favouring formal court processes. Despite legislative frameworks and growing interest in alternative dispute resolution, mediation isn’t widely used in India. This blog explores the efficiency, benefits, and cultural factors that hinder its adoption in the Indian context.

Efficiency of Mediation

Certain aspects of mediation make it a very effective dispute-resolution mechanism, particularly in a litigious country like India:

Flexible and Customizable Process

One of the key advantages of mediation is its flexibility in adapting to the unique needs and circumstances of each case. Unlike court proceedings, which follow rigid procedures, mediation allows parties to customize the process according to their preferences. This flexibility enables parties to focus on the specific issues at hand and explore creative solutions that may not be available through litigation. The ability to tailor the process contributes to efficiency by streamlining discussions and negotiations toward reaching a mutually agreeable resolution.

Preserving Relationships

Mediation emphasizes the relationship between parties, particularly important in ongoing business partnerships, family disputes, or community conflicts. By promoting open communication, active listening, and respect for each party’s perspective, mediation fosters an atmosphere conducive to understanding and collaboration. This focus on relationship preservation can lead to more efficient resolutions as parties are motivated to find mutually satisfactory outcomes, rather than engaging in protracted legal battles that may strain or destroy relationships.

Enhanced Communication and Understanding

Mediation facilitates effective communication between parties, allowing them to express concerns, interests, and needs in a controlled environment. A trained mediator promotes active listening and empathetic communication, leading to a deeper understanding of perspectives and motivations. This enhanced communication reduces misunderstandings, clarifies issues, and enables creative problem-solving.

Greater Control and Ownership of the Outcome

Unlike court litigation where decisions are imposed by a judge, mediation empowers parties to actively participate in the resolution process and craft their own solutions. This sense of control and ownership over the outcome promotes efficiency as parties are more likely to comply with agreements they have played a role in shaping. Mediated settlements are generally perceived as fairer and more satisfactory to the parties involved, which reduces the likelihood of further disputes or appeals, ultimately saving time and resources.

Time and Cost Savings

Mediation saves time and costs compared to litigation. With a shorter duration, often just a few days, mediation expedites the path to settlement. This swift resolution reduces the time and expenses associated with legal proceedings for all parties involved.

Reduces Emotional Toll

Litigation can be emotionally draining and stressful for the parties, often leading to increased animosity and strained relationships. In contrast, mediation provides a supportive and less adversarial environment, which helps alleviate the emotional toll associated with legal battles. The focus on collaboration, empathy, and problem-solving in mediation contributes to a more positive and less stressful experience for the parties. By reducing emotional barriers and facilitating constructive dialogue, mediation promotes efficiency in reaching resolutions that prioritize the interests and well-being of all parties involved.

mediation in india
Mediation holds many benefits for a litigious nation like India, but its adoption has been undermined by multiple factors.

Reasons for Limited Adoption of Mediation in India

Despite the above-mentioned advantages, India has been slow to adopt mediation as a dispute resolution mechanism, due to a range of factors:

Lack of Trust in Mediation

In India, trust in the mediation process is lacking due to concerns about mediator neutrality, competence, and enforceability of agreements. This scepticism arises from a reliance on traditional dispute-resolution methods. Building trust requires educating the public about mediator qualifications and ethical standards, ensuring transparency, and showcasing successful case outcomes.

Adversarial Legal Culture

India has a predominantly adversarial legal culture, with a focus on winning or losing in court. This culture tends to promote a confrontational approach to dispute resolution rather than a cooperative one. Mediation, on the other hand, emphasizes collaboration and finding mutually beneficial solutions. Shifting the mindset from an adversarial approach to a problem-solving approach is crucial for the wider acceptance of mediation.

Limited Role of Lawyers

Lawyers in India play a significant role in dispute resolution, and their involvement is considered crucial. However, some lawyers may perceive mediation as a threat to their practice and income. Educating lawyers about mediation’s benefits and emphasizing their role as facilitators can help overcome this resistance.

Lack of Mediation Skills and Training

The effective practice of mediation requires skills and training. However, there is a scarcity of trained and qualified mediators in India. Mediators need to possess strong communication, negotiation, and conflict-resolution skills. Training programmes and certification courses should be promoted to equip individuals with the necessary mediation skills, thereby enhancing the credibility and effectiveness of the mediation process.

Preference for Judicial Resolution

In India, there is a strong preference for judicial resolution due to the belief that court decisions provide justice and finality. This preference overshadows the benefits of mediation, such as relationship preservation and active participation. Raising awareness about mediation’s advantages can help change this mindset.

Socioeconomic Factors

Socioeconomic factors also contribute to the limited adoption of mediation in India. Mediation is typically associated with commercial disputes, and its application in other areas, such as family disputes or community conflicts, is relatively less prevalent. Lack of awareness and accessibility to mediation services in rural areas and among marginalized communities further hinders its wider adoption. Efforts should be made to make mediation accessible and affordable to all segments of society, including providing support for low-income individuals and establishing mediation centres in underserved areas.

Conclusion

The limited adoption of mediation in India is influenced by a complex interplay of cultural, institutional, and societal factors. Challenges such as cultural preferences for authoritative decision-making, an adversarial legal culture, limited awareness and understanding, and a lack of trust in the mediation process contribute to its slow uptake. Overburdened courts, limited lawyer involvement, and the need for improved mediation skills further impede its widespread use.

To promote a culture of mediation in India, a multifaceted approach is needed. This includes awareness campaigns, educational initiatives, institutional support, capacity building for mediators, and legal reforms to integrate mediation into the existing framework. By addressing these challenges and promoting the benefits of mediation, India can harness its potential for effective dispute resolution. Embracing mediation as a viable option will alleviate the burden on courts and contribute to more harmonious and sustainable resolutions, fostering a just and inclusive society.

Online Dispute Resolution in India

India’s Digital Justice System: How the Country is Embracing Online Dispute Resolution

Digitization in India has undergone substantial and transformative evolution in recent years, underpinned by multiple tactical plans and policies. These aim to harness technology’s potential for enhancing governance, driving economic development, and elevating overall living standards. Currently, India is at a pivotal point in its evolution. It is moving from conventional methods of dispute resolution to a more modern and digital-centric framework. This is similar to how the mass adoption of smartphones and cost-effective data plans have transformed India’s consumer market. The rise of online dispute resolution (ODR) has the potential to dramatically alter the nation’s approach to dispute resolution. This progressive method settles disputes in a streamlined and accessible way, signifying a major change in India’s dispute resolution ecosystem. To understand what ODR is, please refer to our concept note here.

In this blog post, we will specifically understand how India has embraced ODR in the past few months:

Online Dispute Resolution in the securities market

The Securities and Exchange Board of India (SEBI) recently introduced a circular on online dispute resolution in the Securities Market. It follows the gazette notification of the SEBI (Alternative Dispute Resolution Mechanism) (Amendment) Regulations, 2023, dated July 3, 2023.

This circular established an Online Dispute Resolution Portal (ODR Portal) to resolve disputes within the Indian Securities Market. The ODR Portal will resolve disputes between investors/clients and listed companies or specified intermediaries/regulated entities in the securities market. Additionally, it covers disputes between institutional or corporate clients and specified intermediaries/regulated entities.

Before initiating dispute resolution through the Portal, the investor/client must attempt to resolve the grievance directly. If the grievance remains unresolved, the investor/client can escalate it through the SEBI Complaints Redress System (SCORES) Portal. The investor/client can initiate the Online dispute resolution process only after exhausting all available options for resolution. There shall be no fees for registration of a complaint/dispute on the ODR Portal.

The Master Circular provides a comprehensive framework to ensure that the investor is protected at each stage of the process.

Explicit recognition of the term “digital office” in the DPDP Act

The Digital Personal Data Protection Act, 2023 (also known as DPDP Act or DPDPA-2023) is a statute to provide for the processing of digital personal data in a manner that recognises both the right of individuals to protect their personal data and the need to process such personal data for lawful purposes and for matters connected therewith or incidental thereto.

A “digital office”, as envisioned in the DPDP Act, is more than a virtual space. It is defined as “an office that adopts an online mechanism wherein the proceedings, from receipt of intimation or complaint or reference or directions or appeal, as the case may be, to the disposal thereof, are conducted in online or digital mode.”

This represents a complete integration of digital communications, innovative technologies, and streamlined procedures to conduct proceedings online from initiation to completion. The mandate of the Data Protection Board is to be a digital office “as far as practicable.” Hence, as per the defined procedure of the Board in the DPDP law, the receipt of complaints and the allocation, hearing, and pronouncement of decisions should be digital by design. They require the board to adopt techno-legal measures as prescribed in this regard. The Appellate Tribunal, tasked with hearing appeals under the Act, is also directed to operate as a digital office “as far as practicable” with the receipt of the appeal, hearing, and pronouncement being digital by design. It is needless to point out that such procedures embody the principles of ODR for providing seamless, efficient dispute resolution services without in-person hearings.

To know more about digital office, please refer to our op-ed here.

Explicit recognition of “digital evidence,” and any electronic communication such as messages, call recordings, and emails, as well as electronic communication devices in the Bharatiya Nagarik Suraksha Sanhita, 2023 (formerly CrPC)

In a country where legal proceedings have historically been bound by paperwork and physical evidence, this is a transformative step. It aligns the legal infrastructure with the rapid technological advancements that have permeated every other sector of society. The inclusion of digital evidence broadens the scope of what is admissible in court, potentially speeding up legal processes and making them more efficient.

India has indeed been making significant strides toward digitizing its justice system to improve efficiency, transparency, and accessibility. The desire for more accessible, efficient, and cost-effective dispute-resolution mechanisms, particularly in a country with a large and diverse population, drives the need for ODR in India. As technology continues to advance and awareness of ODR grows, keep watching this space for the latest developments and highlights!

Institutional Arbitration

Institutional Arbitration As an Alternative to Unilateral Appointment of Arbitrators

By Arif Mohammed Madani

Recent years, particularly since 2015, have seen certain crucial amendments relating to the law on appointing sole arbitrators. The government amended the Arbitration and Conciliation Act, 1996 (the Act) to include additional Section 12(5) and Schedule VII. Schedule VII saw the addition of certain categories of relationships in order to determine the ineligibility of an arbitrator. Accordingly, as per Section 12(5), any person whose relationship with the parties or counsel or subject matter of the dispute falls under any one of the categories specified in the said schedule shall be ineligible for appointment as an arbitrator. This ineligibility is curable. As per the proviso to Section 12(5), the parties can waive its applicability by an express agreement in writing. This needs to happen subsequent to the dispute having arisen between them.

Based on the above amendments, in the judgements of TRF Ltd. v. Energo Engg. Projects Ltd., (2017) 8 SCC 377, Perkins Eastman Architects DPC v. HSCC (India) Ltd., (2020) 20 SCC 760: 2019 SCC OnLine SC 1517, etc., the Hon’ble Supreme Court and various High Courts have laid down that notwithstanding any prior agreement to the contrary, no unilateral appointment of sole arbitrator is permissible, except by specific and express waiver in writing as per proviso to Section 12 (5). The Courts have also laid down that mere participation in proceedings will not amount to any waiver. Section 4 of the Act constitutes a general exception. Hence, the proviso to Section 12(5) is a special law and particularly deals with the appointment and eligibility of arbitrators.

On the basis of the above judgements, the Courts have set aside awards under Section 34 of the Act. They have also dismissed enforcement/execution petitions under Section 36 of the Act on the ground of unilateral appointment of arbitrators.

Usefulness of Unilateral Appointment
The unilateral appointment of an arbitrator can diminish the usefulness of arbitration.

Thus, it is essential to evaluate various options and proceed with the best one regarding arbitral proceedings.

The available options are as under:

A: To proceed with the existing procedure of unilateral appointment of arbitrators.

B: To approach the High Courts under Section 11 of the Act for the appointment of arbitrators.

C: To administer arbitration from an ADR/ODR institution through an institutional route.

The pros and cons of the aforesaid options are as under:

OPTION A: To proceed with the existing procedure of unilateral appointment of arbitrators

The current appointment procedure leads to the expedient appointment of arbitrators and early disposal of disputes. However, the recent amendments and judicial precedents laid down by the Supreme Court of India and various High Courts have created a legal bar against the unilateral appointment of sole arbitrators.

Courts would continue to allow challenges under Section 34 of the Act and reject executions of awards. This would further aggravate the loss to the company. By the time of setting aside the arbitration award or dismissal of the execution petition, either the limitation to sue would expire or limitation law would bar the claim of the company. The company would have to bear considerable litigation expense in initiating and participating in the arbitration proceedings once again.

OPTION B: To approach the High Courts under Section 11 of the Act for the appointment of arbitrators

Appointing an arbitrator by petitioning the jurisdictional High Court under Section 11 of the Act is the safest method. However, it requires considerable expenditure and is extremely time-consuming. For each arbitration proceeding, a separate petition for the appointment of the arbitrator would be required. The company’s fee schedule for availing of panel advocates’ services in the High Court is INR 11,000 per case. It would also have to bear the same for each of its claims. Besides this, the arbitrator’s fee, if appointed by the High Court, is decided as per Schedule IV of the Act. This would amount to INR 30,000 payable by each party.

After presenting a petition under Section 11 to the concerned High Court, it takes around 2-3 years for the matter to be disposed of. If the trend of appointment by the High Court increases, the heavier burden on courts would also increase this duration.

This alternative, is, therefore, neither economically viable nor efficient.

OPTION C: To administer arbitration from an ADR / ODR institution through an institutional route

Upon enquiry, the Department of Legal Affairs, Ministry of Law & Justice, on 18th September 2020, addressed a notification to all ADR Institutions, including Presolv360, for hosting the list of institutions offering ADR mechanisms (including ODR). Presolv360 has also been empanelled by the Bombay High Court and other Courts as a Mediation Institution.

No company has incorporated a provision of reference to any institution in their loan or arbitration agreement. But the Act provides that the parties can seek administrative assistance to facilitate the conduct of arbitration proceedings under Section 6 of the Act. If the company, with the intent of securing assistance, notifies the opposite party in the pre-arbitration notice under Section 21 of the Act, and if the opposite party does not object to the same, one can regard its omission to object as a waiver under Section 4 of the Act. Thereafter, one may request the institution Presolv360 to register and administer the arbitration proceedings. This waiver is distinct from the specific waiver in Proviso to Section 12(5) of the Act.

Since this waiver comes under Section 4 of the Act, and since the appointing authority is not the company, it does not attract all of the above amendments and judgements, making them inapplicable.

A Commercial Court in Bengaluru, after considering the objections, found this method of appointment of an arbitrator to be correct.

While it is most expedient, safe and proper to incorporate an appropriate clause referring disputes to an ADR/ODR institution such as Presolv360 in the loan or arbitration agreements, for legacy agreements (where including such a clause may be impractical), still the best option amongst all the alternatives would be OPTION C. It will be the safer and more efficient and cost-effective approach. This is perhaps why more than 50 finance companies have been conducting arbitrations through ODR.

Conclusion

It is thus safe to conclude that until an appropriate clause referring disputes to an ADR/ODR institution is incorporated by the company, OPTION C must be adopted for existing claims. To avoid issues with the unilateral appointment of arbitrators, recourse to seeking administrative assistance from an ODR institution must be considered.

Arif Mohammed Madani is a retired district judge with 25 years of judicial experience and over 10 years of experience as an arbitrator.

unilateral appointment

Revolutionizing Conflict Resolution: How to Tackle the Unilateral Appointment Dilemma

The judiciary and the government encourage the use of technology and institutional structure to resolve disputes. Alternative dispute resolution (ADR) and online dispute resolution (ODR) institutions help provide dispute resolution services for arbitration, mediation, and conciliation. These institutions have the requisite administrative and technical expertise.

Arbitration can be an effective method for conflict resolution. However, it can face issues of bias in the case of the appointment of arbitrators by one of the disputing parties. (Image Source: Digits.co.uk Images)

The issue around unilateral appointment

Section 12(5) read with the Seventh Schedule in the Arbitration and Conciliation Act, 1996 (“the Act”) is important to consider. According to it, any party to the agreement or person interested in the dispute’s outcome is ineligible as an arbitrator. Further, the unilateral appointment of an arbitrator by a party to the agreement also makes them ineligible. This also applies in the case of a person interested in the outcome of the dispute. Such a person should not chart any course to dispute resolution by having the power to appoint an arbitrator. Several judgments of the Supreme Court of India and various High Courts in the country have endorsed this viewpoint.

Accordingly, several Courts, under Section 34 of the Act, have set aside awards with instances of unilateral appointment of arbitrators. Additionally, many courts have recently dismissed a number of execution/enforcement petitions, under Section 36 of the Act, on this ground.

Following is the extract of one such case:

It is strange that the NBFCs like the award holder in the case in hand continue to do a shut-eye to the above legal provision and the binding dicta of the Supreme Court which as per Article 141 of the Constitution of India is Law of the Land and continue to appoint Soul Arbitrators [sic] unilaterally. The reluctance in having a neutral arbitrator for the purpose of adjudication of disputes is either rooted in a lack of confidence in the merits of the dispute or just an act of sheer arrogance, indifference, and non-abidance of the law. They seem to be toeing the same old line of taking a chance, with a mind that they would fall in line only when some objection is taken by the respondent at any point of time or some Court in some Order objects to the same. This conscious illegality which is continuing unabatedly in blatant violation of Statutory Laws and Laws laid by the Hon’ble Supreme Court needs to be stopped and curbed effectively.

The correct legal position on the above definition is that although the above definition was proposed by Arbitration and Conciliation (Amendment) Act, 2019 i.e. Act no. 33 of 2019 but the same is yet to be notified and is as such not binding law in [the] Arbitral arena. Moreover, the proposed amendment of the Act talks of constituting an ‘Arbitration Council of India’ which, in turn, will prepare a list of Arbitration Institutions on the basis of infrastructure, the calibre of arbitrators, performance, compliance of time limits etc. As per [the] proposed amendment, under Section 11(3A) of the Act, the designation of institutions by the Hon’ble Supreme Court and the High Courts is to be carried out only as per the proposal made by the ‘Arbitration Council of India’. This Court is apprised by Ld. Counsel for the plaintiff that the controlling Ministry of Arbitration and Conciliation Act, 1996 under Allocation of Business Rules, 1961 is the Ministry of Law and Justice, Govt. of India. It is submitted that the Law Ministry, Govt. of India has already prepared and notified a Pan India “List of Arbitral Institutions” offering quality Arbitration and Mediation services and the same is available in [the] public domain.

The above-detailed discussion fairly brings to the fore one fact that the ‘Unilateral Appointment of Arbitrators’ by the NBFCs is nothing but a blatant violation and disregard of Law laid by the Full Bench of Hon’ble Supreme Court and is akin to Contempt of Court. Filing a petition seeking execution of such Ex-Parte Awards obtained through such Unilateral Appointments is nothing but a classic example of abuse of the process of Courts by Award Holders to extract money out of the hapless respondents who more often than do not have any clue about the very initiation, holding of proceeding and passing of such like Ex-Parte Arbitral Awards before the chosen Sole Arbitrators in an assembly line like fashion.

Instead of aligning their Arbitration Agreements/Clauses and Arbitral Practices in consonance with Section 12(5) read with Schedule 7 of the Arbitration and Conciliation Act, 1996 post its amendment in 2015, they continued to harp over their age-old law practices of having in-house Unilaterally Appointed Arbitrators.

As guided by the afore-discussed binding judgments of the Hon’ble Supreme Court and Hon’ble Delhi High Court, the Ex-Parte Arbitral Award dated 30.12.2017, passed by Unilaterally Appointed Sole Arbitrator namely Sh. Durai Kaliyarethnam is declared ‘Non- Executable’. Considering this petition seeking execution of a clandestinely obtained Ex-Parte Arbitral Award as an ‘Abuse of Court Process’, the Execution Petitioner is burdened with the cost of Rs.25,000/-…

Arbitration in legacy agreements through Presolv360

Presolv360 is an independent and neutral ODR platform. It administers disputes by leveraging its institutional structure through mechanisms like mediation, conciliation, and arbitration on its virtual platform. Presolv360 merely provides technical and administrative support to the parties and the arbitrator for conducting the proceedings virtually. It has no interest in the outcome of the dispute or any conflict of interest. Presolv360 plays no role whatsoever in the determination of any dispute. It does not undertake any adjudicatory functions but only provides a virtual platform along with all support services.

The Department of Legal Affairs, Ministry of Law & Justice issued a notification (as referred by the District Judge). Addressing all ADR institutions, including Presolv360, it required a list of institutions offering ADR (and ODR) on the Department’s website. Presolv360 has additionally been empanelled as a Mediation Institute for court-annexed and pre-institution mediation. This is by the Main Mediation Committee, Hon’ble Bombay High Court and the Hon’ble Bombay City Civil and Sessions Court.

How does the arbitration process work at Presolv360?

Presolv360 empanels independent, qualified arbitrators with the required competence, knowledge, and varied expertise on its panel of arbitrators. The panel is diverse and consists of retired judges and other professionals like lawyers, engineers, accountants, etc. The Act governs the arbitration proceedings. An arbitrator from the said panel, on behalf of all the parties, presides over the arbitration proceedings. Any one party cannot hand-pick the panel. Due diligence ensures that there is no connection between any person on the panel and any of the parties to the matter. For this purpose, Presolv360 may use its automated case allocation tool that runs algorithms to randomize the assignment process.

The arbitrator must provide acceptance and consent to act as an arbitrator in the dispute, confirm that he/she is qualified, possesses the required competence, knowledge, and expertise to deal with the subject matter of the dispute and undertake to devote sufficient time to conduct the arbitration proceedings within the time limits prescribed. Further, the arbitrator makes requisite disclosures prescribed under Section 12 read with the Fifth Schedule to the Act. The arbitrator further confirms that his/her relationship with the parties or counsel or the subject matter of this dispute does not fall under any of the categories specified in the Seventh Schedule to the Act.

From the inception, the parties know of the administration of the proceedings through the virtual platform/institution. Thereafter, in the notification of registration of arbitration, details of the arbitrator along with the option to seek the list of arbitrators on the panel for the purpose of choosing another arbitrator to resolve the dispute is provided to the parties. Further, the parties are also provided with a simplified procedure to challenge the assignment of the matter to the arbitrator, as per law. Accordingly, all the parties to the dispute have an equal say in the appointment of the arbitrator and the constitution of the arbitral tribunal and also have the option to challenge the arbitrator on grounds concerning the arbitrator’s independence or impartiality or qualifications.

This is not a case of unilateral appointment of the arbitrator or appointment of the arbitrator by a person interested in the outcome or award passed by the arbitrator during the arbitration. The parties learn of the assignment of the arbitrator at the same time and have equal say and opportunity with aspects concerning the appointment of the arbitrator and the constitution of the arbitral tribunal, thus eliminating any influence of either party in the appointment of the arbitrator.

Endorsing this viewpoint, the Commercial Court, Bengaluru, while deciding an application under Section 14(2) read with section 14(1)(a) of the Act3, where Presolv360 administered the arbitration proceedings, held that:

“The applicant though has sought for termination of the arbitrator’s mandate on the ground of ineligibility, none of the circumstances as specified in the Seventh Schedule are shown to have been existing. Therefore, the sole arbitrator appointed through the ODR platform, per se, cannot be held to be ineligible under Section 12(5) of the Act.”

Arbitration in prospective agreements

For new agreements, we urge the incorporation of a dispute resolution clause enabling ODR through an independent institution. Model clauses can be viewed here.

small-value claims

Safeguarding The Effectiveness And Purpose Of Arbitration In Small-Value Claims

By Arif Mohammed Madani

Arbitration has been a go-to solution for various organizations, companies, and even individuals. It can settle disputes through a (perceived-to-be) quicker and more efficient dispute resolution mechanism than the courts. This is particularly useful for small-value claims where the parties wish to avoid excessive legal costs to resolve their disputes.

However, we must ask whether arbitration has been able to live up to its expectation and fulfil its purpose. And if not, what is the solution?

The Supreme Court of India, in the case of Shree Vishnu Constructions v. The Engineer In Chief Military Engineering Service & Ors, recognized delays in the disposition of applications. The dispositions occurred under Section 11 of the Arbitration Act. Upon receiving a report on the matter, the Court determined that there were outstanding applications dating back to 2006. The Court further stated that failure to decide applications within a reasonable period of time would defeat the Act’s objectives. 

When does the court appoint an arbitrator?

For the uninitiated, Section 11 relates to the appointment of an arbitrator by the court. Sometimes, the parties are unable to appoint an arbitrator through mutual consent or in accordance with established procedures. If so, they must seek the intervention of the courts, which they originally sought to avoid through arbitration. Unfortunately, the courts have consistently failed to meet the expectations of those seeking expedited resolution. They often take extended periods of time to appoint an arbitrator. 

This compromises the effectiveness of arbitration as a means of dispute resolution from the outset. If the parties have to reach the courts for even an arbitrator’s appointment, it defeats the purpose of the arbitration. To illustrate, consider the use of arbitration clauses in “legacy agreements” between banks and their customers. These agreements typically include provisions stating the use of arbitration to resolve disputes between the parties. The perceived advantages of speed and efficiency of arbitration likely drive this decision. However, as previously discussed, appointing an arbitrator by the courts can be a lengthy and protracted process. That completely undermines the intended benefits of arbitration. 

Ways to appoint an arbitrator

In situations where a significant number of customers default on their loans, or if they fail to make timely payments on their instalments, banks may have to resort to arbitration to resolve the resulting disputes.

In such cases, the banks usually have only two options available to them:

  • Option 1: To appoint an arbitrator with the consent of the other party. This is often unlikely to happen, given that the defaulting party may never agree to the arbitrator, and they would want to delay the proceeding as much as they can.
  • Option 2: To petition the courts for the appointment of an arbitrator, which can also be a time-consuming process.

It is not difficult to envision a scenario in which courts receive a large number of default disputes for the appointment of an arbitrator, particularly in the wake of the COVID-19 pandemic. With around five crore pending cases already choking the judicial system, the influx of additional cases would only serve to further clog the courts.

Ironically, the use of arbitration was to be a distinct and efficient alternative to the court system. Now it is becoming reliant on the courts for its own functioning, and ultimately losing its effectiveness and efficiency as a result. 

The importance of institutional arbitration for small-value claims

One potential solution to this issue is the increased use of institutional arbitration, particularly through online dispute resolution (ODR) institutions. The banks and other parties involved in the disputes, particularly those related to defaults, can refer their cases entirely to these institutions, instead of relying on courts. These institutions often maintain a panel of highly qualified arbitrators who are able to promptly and fairly resolve such disputes. This approach saves the courts’ time and allows the arbitration process to achieve its intended purpose. 

It is noteworthy to mention that the Arbitration and Conciliation Amendment Act of 2019 included provisions for the creation of the Arbitration Council of India. Specifically, Section 3 of the Arbitration and Conciliation (Amendment) Act, 2019 amended Section 11 of the principal Act to grant the Supreme Court and the High Courts the authority to designate arbitral institutions, to be graded by the Arbitration Council of India. Additionally, Section 3(ii) and Section 3(iv) of the Amendment Act amended Sub-section 4 and Sub-section 6 of Section 11 respectively to give arbitral institutions the power to appoint arbitrators, rather than relying on the courts to do so. However, these provisions have yet to be officially notified, and it is necessary for this to occur in order for them to be fully implemented. 

It is legally permissible for the parties to a dispute to utilize an arbitration institution as an alternative to the courts. It is suggested that banks and other organizations begin to utilize this option in order to more efficiently and effectively resolve disputes. In order to avoid confusion and ensure the smooth operation of the arbitration process, it would be advisable for the parties to specify the names of the chosen arbitration institutions in their agreements. 

Arif Mohammed Madani is a retired district judge with 25 years of judicial experience and over 10 years of experience as an arbitrator.

Adapted from Safeguarding the effectiveness and purpose of arbitration in small-value claims, published in Bar & Bench on 28 January 2023.

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