India
In your jurisdiction, are there any formal ADR procedures available for resolving commercial disputes other than litigating (or arbitrating) to a final hearing?
Indian law provides several formal ADR mechanisms to resolve commercial disputes without a full trial or arbitral award. Key ADR processes include:
Mediation: A neutral facilitator helps parties negotiate a settlement. Mediation can be court-annexed (referred during litigation) or conducted privately/institutionally (e.g. via contract clauses or mediation centers). The Mediation Act, 2023, (although all provisions of the Act are not yet in force), provides a unified framework for mediation (including pre litigation and online mediation) and makes mediated settlements enforceable as court decrees.
Conciliation: Conciliation is recognized through the Arbitration and Conciliation Act, 1996. Section 62 of the Act empowers a party to the dispute to initiate conciliation on the approval of the other party. The parties then reach a settlement agreement which has the same effect as an arbitral award under the Act.
Lok Adalat: A statutory settlement forum under the Legal Services Authorities Act, 1987. Chaired by judicial officers, Lok Adalat facilitates compromise settlements in pending cases or pre-litigation matters. Any award of a Lok Adalat is final and binding with no appeal permitted. They are frequently used for banking, finance, and other commercial recovery matters to reach quick, cost-effective settlements.
Additionally, there are sector-specific ADR mechanisms for commercial disputes. For example, the Commercial Courts Act, 2015 has mandated compulsory mediation prior to institution of commercial suits. Mandatory reference to Conciliation and on failure thereof, Arbitration is provided under the Micro, Small and Medium Enterprises Development Act, 2006 in supplier buyer disputes. Civil Procedure Code, 1908 empowers civil courts to relegate parties to other forms of ADR mechanism (viz mediation, judicial settlement including through Lok Adalat) in cases where it appears to the court that there exist elements of a settlement.
These mechanisims illustrate India’s broad commitment to ADR in the commercial context.
Does engaging in ADR have any effect on potential or existing litigation or arbitration?
Indian law does not generally stall limitation for all voluntary ADR; hence parties should be mindful of limitation deadlines if they engage in private ADR before instituting a case.
However, under the provisions of the Commercial Courts Act, 2015, a plaintiff must undergo pre-litigation mediation before filing a commercial suit (unless urgent relief is needed). The statute explicitly provides that the time spent in pre-institution mediation is excluded from the limitation period for filing the suit.
Further, when a court refers an ongoing case to mediation or other ADR, the judicial proceedings are essentially stayed or adjourned pending the outcome. The court will typically set a timeframe for the ADR, and during this period, the litigation is on hold. If mediation fails, the case resumes from where it left off. If it succeeds, the parties will typically present the settlement to the court to be recorded as an order or decree.
In Arbitration, parties may mutually agree to suspend arbitral proceedings to attempt mediation/conciliation. The Arbitration and Conciliation Act, 1996 encourages this. Should parties settle, the arbitral tribunal can terminate the proceedings and, if requested, record the settlement terms as an “award on agreed terms” (consent award), which is enforceable like any other arbitral award.
ADR compulsory and if so are there any consequences if a party fails to engage in ADR? If it is not compulsory are there any plans for this to change?
Generally, ADR is voluntary, but there are important exceptions and an increasing policy push toward mandatory ADR in certain commercial disputes.
Commercial Courts Act, 2015 mandates pre-institutional mediation and settlement except in situations where any urgent interim relief is required to be granted. Failure to adhere to this mandatory provision will result in the rejection of plaint (the claim).
The Micro, Small and Medium Enterprises Development Act, 2006 prescribes mandatory reference to Conciliation and on failure thereof to Arbitration.
Courts in India have generally held that when a contract contains an arbitration clause and mediation/conciliation is a mandatory prerequisite thereto, such preconditions in a dispute clause are binding and the parties cannot initiate arbitration without exhausting the first step.
The Government of India has not signed any pledge to enter into/consider ADR in all cases.
Can the parties agree, in advance of any potential dispute, to engage in ADR?
Yes. The parties can agree in advance that they will or may try one or more ADR methods, such as mediation, to resolve any dispute that may arise. For example, a dispute resolution clause in a contract can provide that mediation is required prior to commencing litigation or arbitration.
When does ADR generally take place?
ADR can take place at virtually any stage of a commercial dispute – before a case is filed, during litigation/arbitration, or even on appeal, but there are common junctures where it is initiated:
Pre-Litigation/Pre-Arbitration: Parties often attempt ADR before invoking formal legal proceedings. This can be voluntary, statutory or pursuant to a contract clause or law.
During Litigation: If a lawsuit is filed, the judge might pause the process and send parties to mediation, when the case appears to be capable of settlement.
During Arbitration: Arbitration proceedings can be paused for ADR. Parties may invoke a pre-agreed mediation step after arbitration has been filed but before substantive hearings. Even absent a prior agreement, arbitrators can encourage settlement talks. Under Section 30 of the Arbitration and Conciliation Act, 1996 with the parties’ consent, an arbitral tribunal may “mediate” or facilitate settlement at any time during the arbitration.
Continuous Availability: ADR can be attempted more than once. If an early mediation fails, parties might try again later as circumstances evolve.
Is ADR subject to without prejudice privilege and/or confidential? If not, is there any other means to protect confidential information?
Confidentiality is a cornerstone of ADR in India, especially for mediation, conciliation, and negotiation. Communications and documents exchanged during ADR are protected by without prejudice privilege and statutory confidentiality provisions, meaning they generally cannot be disclosed or used in evidence if the dispute later goes to court or arbitration.
Does the output from ADR create precedents?
ADR mechanisms including Mediation and Conciliation are private in nature and do not create precedential value.
Who bears the costs of ADR?
The costs of ADR in commercial disputes are usually borne by the parties, typically split equally, unless agreed otherwise.
Is your jurisdiction subject to any specific rules for cross border ADR?
India is a signatory to the recently adopted United Nations Convention on International Settlement Agreements Resulting from Mediation (the ”Singapore Convention on Mediation”) but the same is yet to be ratified by India. Mediation settlements made outside India have no special status in Indian courts.
Are there any particularly unusual features of ADR in your jurisdiction that you are aware are different to other jurisdictions?
The Lok Adalat system is fairly unique to India. Lok Adalats are forums where disputes (including commercial debt recovery, utility bills, etc.) are settled through conciliation under the Legal Services Authorities Act. A settlement in a Lok Adalat is given the status of a civil court decree and is final, with no appeal.
Additionally, Permanent Lok Adalats (PLAs) exist for public utility services disputes (like telecom, insurance, transport). A PLA not only facilitates settlement but if the parties fail to settle, the PLA can itself decide the dispute on merits up to a certain monetary limit.
The Mediation Act, 2023 lists disputes not fit for mediation. These include matters involving minors or persons of unsound mind, cases involving prosecution for criminal offenses, disputes affecting rights of third parties, and matters of public interest/policy (e.g. tax disputes, environmental matters).
India is rapidly embracing online dispute resolution (ODR) for commercial disputes, with support from NITI Aayog and the judiciary. While not entirely unique, the scale (given India’s tech boom) and government backed promotion of ODR are remarkable.
The Delhi High Court is currently running a special mediation drive called “Mediation ‘For the Nation’”. This initiative aims to encourage settlement of disputes through mediation, both in pre-litigation and during ongoing court cases. The High Court and District Courts are identifying suitable cases for referral to mediation, and parties are being notified.
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