Introduction
The Indian judiciary, as per recent data, has an overwhelming backlog of 4.8 crore cases with 13 lakh cases still in the pre-litigation stage. Large enterprises often face high litigation spend, slow dispute resolution, and incur reputational damage due to pending lawsuits. Indian citizens and enterprises suffer from dispute resolution costs worth Rs 24.72 trillion (7.5% of GDP).
Over the past few years, alternative dispute resolution (ADR) mechanisms—particularly arbitration and mediation—have gained significant traction, receiving active support and adoption from both the legislature and judiciary. However, technological advancement has necessitated a fundamental shift in how disputes are resolved. The move from in-person, paper-heavy proceedings to virtual-first models represents a natural evolution in dispute resolution practice. Within this context, Online Dispute Resolution (ODR) has emerged as a viable alternative for parties seeking faster, more efficient dispute resolution.
The efficiency gained from ODR is substantial, while resolving disputes through the conventional route takes approximately 1,445 days (3.9 years), ODR mechanisms can dispose of comparable cases in approximately 45 – 90 days. This dramatic acceleration in dispute resolution timelines can be particularly effective in contract-intensive industries such as Banking, Insurance, MSMEs and Rental services, where the speed of dispute resolution has a direct bearing on business continuity and efficiency.
The article builds a case for ODR as an effective and efficient means of dispute resolution to resolve the challenges faced by enterprises while resorting to traditional or adversarial forms of dispute resolution, particularly litigation. Furthermore, the article recommends actions to accelerate enterprise adoption of ODR.
The Enterprise Dispute Bottleneck
Enterprises primarily face four challenges with traditional dispute resolution mechanisms, such as:
- High Litigation Spend – Enterprises incur high costs during a dispute, such as court fees, document costs, lawyer fees, and travel expenses. These costs do not include hidden costs, such as the opportunity cost of investing in product development, marketing, sales, and brand building. Contract-intensive industries spend 3.12 lakh crores annually on dispute resolution. Furthermore, enterprises lose business worth Rs 30,000 crores annually due to court hearings.
- Slow Dispute Cycles – The commercial tribunals of India have a mounting backlog of 356,000 cases, with 40,000 cases being filed every day across India. The average time taken for disposal of cases in Indian courts is 3-4 years, with some cases dragging on for more than 10+ years. Enterprises in competitive markets would be held back due to such long dispute cycles.
- Customer Dissatisfaction – The majority of disputes that are filed in court are small-value disputes that can be effectively solved through ODR. These disputes include consumer disputes, contractual disputes, and loan defaults that could lead to customer dissatisfaction and affect the goodwill of the business.
The Business Case For ODR
- Cost-Effectiveness – ODR is cost-effective in comparison to other methods of dispute resolution, such as court and ADR. Enterprises that adopt ODR have experienced an increase in productivity of 22% and average value added of 55% per worker. ODR reduces printing costs for enterprises, and $11 billion is spent annually in court hearings on paper.
- Timely Resolution – Disputes through ODR are resolved in days and not years. Disputes through ODR are resolved in 45-90 days, with some matters even being resolved within hours. Normally, such disputes would be resolved in 1,445 days (3.9 years). This ensures that contractual disputes do not affect the business and reputation of the enterprise. India ranks 63rd in the ease of business ranking, and jurisdictions with timely resolution provide a conducive environment for enterprises.
- Goodwill and Reputation – Enterprises that operate in industries such as banking, finance, e-commerce, and insurance need to maintain the trust and credibility of their customer. Dispute resolution that happens in days and not years will boost consumer trust and promote better business relations, as ODR can ensure that dispute resolution does not come at the cost of the reputation and business relations of the enterprise.
ODR In Action
ODR has been adopted by many businesses as an effective means to resolve disputes in a cost-efficient and timely manner. There have been many businesses that have implemented ODR as part of their dispute resolution framework. In this section, we will assess two case studies of businesses adopting ODR that have resulted in beneficial dispute resolution.
- eBay
E-commerce can be effectively resolved through ODR. 3-5% of e-commerce transactions end in disputes. eBay manages over 60 million disputes and classifies these disputes into items not received, items not as described, and unpaid items. eBay offers specialized platform services for disputes under vehicle purchase protection and business equipment purchase protection programs.
eBay’s dispute resolution service was launched in the 1990s to encourage buyers and sellers to communicate directly. In 1996, when it was launched, the process used human mediators. However, eBay’s dispute resolution in 1999 evolved into a computer-mediated process between buyers and sellers.
This service was able to resolve over 200 disputes in the first week of its launch. Though exact statistics of the benefits derived are not available, the platform uses a five-tier standardized process:
- Access the resolution center
- Automatic screening of the complaint to confirm eligibility (Money Back Guarantee, payment through “pay now,” and filing within 30 days of delivery).
- Collect proposed solutions and encourage direct communication between buyer and seller.
- If unresolved after 3 business days, the buyer may escalate the case.
- The Resolution Services team reviews and returns a decision within 48 hours, issuing refunds through chargebacks when appropriate.
- ICICI Bank
ICICI Bank is one of the largest private sector banks in India. ICICI Bank manages a retail portfolio of loans worth billions. The portfolio comprises a variety of loans ranging from vehicle loans, business loans, rural credit, credit cards, and home loans. Within these different loans, small loans that had a value of less than Rs 20 lakhs were the most difficult to recover.
Court cases require substantial spending on travel and long hours spent on transit. The underlying loan becomes worthless by the time the dispute is resolved.
Before utilizing ODR for dispute resolution, the lifespan of a case was 3 years with 12 hearings on average, and the bank had to spend a minimum of 6-person person-days of effort for each case. After implementing ODR, the lifespan of each case dropped to 45 days, and the cost per case was Rs 3,500. ODR is much more effective than traditional ADR, in which the lifespan of a case is 1 year.
From these two case studies, we can understand that enterprises that adopt ODR solve disputes in a cost-effective and timely manner that ensures customer satisfaction and maintains the goodwill of the enterprise.
Strategies For Enterprise Adoption
- Lack of clear legal status: ODR was recognized as a valid method of dispute resolution in Shakti Bhog vs Kola Shipping and Trimex International vs Vedanta Aluminium Ltd. The court upheld the validity of online arbitration agreements as long as they are compliant with Sections 4 and 5 of the Information Technology Act, 2000, read with the erstwhile Section 65B of the Indian Evidence Act, 1872, and the provisions of the Arbitration and Conciliation Act,1996. However, explicit statutory recognition of ODR is essential, particularly through the Arbitration and Conciliation Act, 1996 and Code of Civil Procedure, 1908. This would strengthen the confidence of enterprises in adopting ODR. In this regard, the Arbitration (Amendment) Bill, 2024 represents a positive step forward, as it expressly incorporates provisions for online hearings within arbitral proceedings. This legislative recognition shows governmental support for technology-enabled dispute resolution.
- Digital Divide and Literacy: There are over 5.93 crore MSMEs in India that operate in rural areas. It is mostly these small enterprises that form a big market of ODR. These enterprises do not have access to reliable internet and the skills to utilize digital systems. The government should invest heavily in high-speed internet access, public Wi-Fi hotspots, and community-led digital literacy programs.
- Training of legal professionals: Lawyers, Arbitrators, and Mediators often lack the skills required to conduct ODR. Enterprises often hesitate to shift to ODR without the existence of specialized professionals. This would involve creating professional training pipelines such as ODR-focused training centers for lawyers, arbitrators, mediators, compliance officers, and in-house teams. ODR platforms can partner with law schools and industry associations to offer certification programs.
Conclusion
Enterprises no longer have to drown themselves in litigation. ODR offers a cost-effective and timely method for resolving disputes in comparison to courts and ADR. Enterprises save money and time, ensuring goodwill and compliance. This allows enterprises to invest and expand their core capabilities through product development, marketing, sales, and human resources.
While ODR emerges as a preferred mode of dispute resolution, its explicit recognition by the legislature will instill better trust and more expedited adoption. Furthermore, investing in digital literacy and internet infrastructure to train legal professionals and help them navigate the ODR landscape will enable better participation of talent. The future of dispute resolution is not in courtrooms and paper but in the virtual world.
Sources: ODR Handbook (Dispute Resolution Online), NLIU Law Review Blog, Drishti IAS, PIB, Lexology, ClearIAS, PreSolv360, Vidhi’s paper ‘Future of Dispute Resolution in India’, University of Missouri Library Guides, “TECHNOLOGY MEETS LAW: THE RISE OF ONLINE DISPUTE RESOLUTION IN INDIA” (Indian Journal of Law and Legal Research Volume VII Issue 1), New Indian Express and Business Standard.
