ADR: Complete Notes

About this subject

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The subject has six units: (1) the idea of a dispute and the growth of ADR in India; (2) negotiation, the most basic method; (3) mediation, i.e. negotiation assisted by a neutral person; (4) the law governing mediation in India; (5) arbitration, where the neutral person decides the dispute; and (6) Online Dispute Resolution, where technology changes how all these processes work.

Disputes: Meaning, Causes and Escalation

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Conflict and dispute

Every ADR process exists to resolve a dispute. Many writers separate conflict from dispute.

Point	Conflict	Dispute
Meaning	A wider state of disagreement or tension; interests, needs or values pull in different directions.	A conflict that has become specific: one person makes a definite claim and the other rejects it.
Illustration	A tenant feels the rent is unfair.	The landlord demands ₹5,000 a month more and the tenant refuses in writing.
Who deals with it	Negotiation and mediation can reach this deeper level (e.g. years of mistrust).	Courts and arbitrators deal only with the specific rejected claim (e.g. whether the increase is lawful).

Hence different methods may resolve the same dispute very differently.

Why disputes arise: Christopher Moore's five causes

A good negotiator or mediator first looks for the real cause. Christopher Moore's well-known classification in mediation literature:

1. Data conflicts: wrong or different information, or the same facts read differently.
2. Interest conflicts: both sides want the same limited thing, such as money or land.
3. Structural conflicts: unequal power or resources, or deadlines imposed by the situation.
4. Value conflicts: different beliefs about what is right.
5. Relationship conflicts: strong emotions, poor communication and past behaviour.

How conflicts escalate

Conflicts grow in a predictable pattern: a single issue attracts more issues; the focus moves from the problem to the person, who is now seen as bad rather than holding a different view; communication moves from talking to accusing to threatening; family, colleagues and lawyers are drawn in; and the aim shifts from solving the problem to winning, and finally to hurting the other side even at a cost to oneself.

The Austrian researcher Friedrich Glasl described this as a downward staircase of nine steps in three phases: in the first phase both sides can still win; in the middle phase one wins and the other loses; in the last phase both lose.

The Traditional Court System and Its Limits

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Strengths of litigation: an independent judge; fixed rules of procedure and evidence; a public decision, enforceable by the power of the State and correctable on appeal; and precedents that guide everyone else. For some disputes nothing can replace a court: a citizen challenging the State for violating fundamental rights, a criminal prosecution, or a public interest case about pollution.

Limits of litigation:

1. Delay: a backlog of several crore cases; a simple civil suit with appeals may take many years.
2. Cost: court fees, lawyers' fees and lost business time.
3. Formality: procedure and evidence rules are hard for an ordinary person.
4. Adversarial nature: each side tries to prove the other wrong; relationships are usually destroyed.
5. Win-or-lose result: a court declares who is right but often cannot design a creative solution, such as one brother keeping the shop and the other the brand.
6. Publicity: business secrets and family matters enter a public record.

The search for faster, cheaper, more private and more flexible methods gave birth to ADR.

Meaning and Concept of ADR

Some scholars prefer Appropriate Dispute Resolution: ADR is not a second-class substitute for courts, and the aim is to choose the method best suited to each dispute. Like a hospital, not every patient needs surgery; some need advice, some medicine, and only some the operating theatre.

Multi-door courthouse: at the Pound Conference of 1976 in the United States, the American scholar Frank Sander suggested that a court could become a dispute resolution centre with many doors, where an officer directs each person to the right door (mediation, arbitration or a regular trial). This came to be called the multi-door courthouse. Indian law adopted the idea through Section 89 of the Code of Civil Procedure.

Classification of ADR Processes

Consensual and adjudicatory processes

Point	Consensual	Adjudicatory
Outcome decided by	The parties; nobody can impose a solution.	A neutral third person who hears both sides.
Role of the neutral	Helps the parties decide.	Decides for the parties.
Examples	Negotiation, mediation, conciliation.	Litigation, arbitration.

Binding and non-binding processes

The test is whether the outcome can be enforced against a party who later changes its mind. A court decree and an arbitral award are binding. During mediation or conciliation nothing binds a party and either side may walk away, but a signed, valid settlement agreement is binding. Indian law gives such settlements real force:

• A Lok Adalat award is deemed to be a decree of a civil court.
• A settlement in a court-referred mediation is recorded by the court in a decree.
• Under the Mediation Act, a mediated settlement agreement will be enforceable like a decree, but that provision is not yet in force.
• A conciliation settlement under the Arbitration and Conciliation Act has the status of an arbitral award on agreed terms.

Party Autonomy: The Foundation of ADR

Party autonomy, the single idea uniting all ADR methods, means that the parties, not the State, control the process. In negotiation and mediation the parties control both process and outcome. In arbitration they do not control the outcome, but choose the arbitrator, place, language, procedure and often the law; even the decision to arbitrate rests on their agreement. Party autonomy works within the limits of mandatory law and public policy, but is the starting point of every ADR process.

History of ADR

Ancient India

ADR is not a recent import. Many disputes never reached the king's court; the community settled them. The Yajnavalkya Smriti describes a ladder of popular bodies: the kula (family or kinship group), the shreni (guild of the same trade or craft) and the puga (assembly of the same locality). Disputes went to these bodies first, and only then to the king's officers. The village panchayat, where respected elders heard both sides and suggested a fair settlement, continued the tradition for centuries, relying on community trust and aiming to restore relationships rather than merely declare a winner.

British period

• From the late eighteenth century, regulations in the Bengal, Bombay and Madras presidencies encouraged reference to arbitrators, giving arbitration statutory form.
• The Indian Arbitration Act, 1899 applied mainly in the presidency towns.
• The Code of Civil Procedure, 1908 dealt with arbitration in its Second Schedule.

Arbitration Act, 1940 and the foreign award laws

The 1940 Act consolidated domestic arbitration law but worked badly: courts interfered at almost every stage and awards were challenged again and again, which, as the Supreme Court once remarked, made lawyers laugh and legal philosophers weep. Foreign awards were governed by the Arbitration Protocol and Convention Act, 1937 and the Foreign Awards Recognition and Enforcement Act, 1961, the latter giving effect to the New York Convention.

Arbitration and Conciliation Act, 1996

With India liberalising its economy and foreign investors wanting a modern, predictable law, the 1996 Act was based on the UNCITRAL Model Law on International Commercial Arbitration, 1985 and the UNCITRAL Conciliation Rules, 1980 (UNCITRAL: United Nations Commission on International Trade Law). It replaced all three earlier laws. Its central promise: minimum court interference.

Conciliatory institutions and later milestones

When	Development
Early 1980s	Lok Adalat movement began in Gujarat.
1987 (in force November 1995)	Legal Services Authorities Act gave the Lok Adalat statutory status. Single-day National Lok Adalat sessions now dispose of huge numbers of cases, mostly before they reach any court.
Family law	The Hindu Marriage Act and the Family Courts Act require courts to first try reconciliation or settlement.
2002	Section 89 of the Code of Civil Procedure came into force.
April 2005	First court-annexed mediation centre inaugurated at the Madras High Court.
2005	Supreme Court's Mediation and Conciliation Project Committee set up to spread mediation nationwide.
2018	Mandatory pre-institution mediation for commercial disputes.
2023	Mediation Act, only partly in force.

Why ADR grew so fast

1. Courts were slow and burdened with delay.
2. Trade grew after 1991, creating business disputes needing speed, privacy and expert decision-makers.
3. International business needed a neutral forum; no foreign company wants to fight in its opponent's home courts.
4. The constitutional promise of access to justice for the poor led to legal aid and the Lok Adalat.
5. A settlement the parties accept lasts longer than an imposed decree.
6. Parliament and the courts actively supported ADR.

Legislative and Judicial Recognition of ADR

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The legal foundation of ADR lies in the Constitution, the Indian Contract Act and the Code of Civil Procedure, as explained in two Supreme Court judgments.

Article 39A of the Constitution

Added to the Directive Principles of State Policy by the 42nd Amendment in 1976, Article 39A directs the State to ensure that the legal system promotes justice on the basis of equal opportunity and, in particular, to provide free legal aid through suitable laws or schemes, so that no citizen is denied the opportunity to secure justice because of economic or other disabilities. Directive Principles are not enforceable in court on their own, but Parliament acted on this one through the Legal Services Authorities Act, 1987, which created legal services authorities at the national, state and district levels (with taluk-level committees) and gave statutory status to the Lok Adalat.

Section 28 of the Indian Contract Act, 1872

Section 28 makes void, to that extent, any agreement absolutely restraining a party from enforcing his contractual rights through the usual legal proceedings, and any agreement limiting the time for enforcing them. If Prince and Farhan agree that neither will ever go to court about their contract, the agreement is void. How, then, is an arbitration agreement, which takes the dispute away from the ordinary courts, valid? Through the exceptions:

• Exception 1: a contract that any future dispute on a subject shall go to arbitration and only the amount awarded shall be recoverable.
• Exception 2: a written contract to refer to arbitration a question that has already arisen.

Section 89 CPC and the Landmark Cases

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Section 89 of the Code of Civil Procedure, 1908

The most important provision for court-annexed ADR, inserted by an amendment of 1999 and in force from 1 July 2002. Where the court sees elements of a settlement acceptable to the parties, it shall formulate possible terms of settlement for their observations, may then reformulate them, and refer the dispute to one of four methods: arbitration, conciliation, judicial settlement (including settlement through a Lok Adalat), or mediation.

Order 10 was amended at the same time: Rule 1A requires the court to direct the parties to opt for one of these methods; Rule 1B requires them to appear before the chosen forum; under Rule 1C, if the effort fails, they return to the court.

After the reference: for arbitration or conciliation, the Arbitration and Conciliation Act applies as if the reference were made under it; for a Lok Adalat, the Legal Services Authorities Act applies. The section also deals with judicial settlement and mediation, but the drafters accidentally interchanged those two definitions (see Afcons).

The Mediation Act, 2023 contains a replacement for Section 89, but that provision has not been brought into force, so the old section still operates.

Other holdings in Afcons

• Clerical error corrected: the definitions in clauses (c) and (d) of sub-section (2) were interchanged. Read correctly, mediation is a reference to a suitable institution or person (the mediator), who is deemed to be a Lok Adalat; judicial settlement is a compromise brought about by a judge.
• Detailed terms of settlement need not be formulated before a reference (impractical at that early stage); a short summary of the dispute is enough.
• A hearing after the pleadings to consider ADR is mandatory; an actual reference is not mandatory in every case.
• A settlement in a court-referred mediation or judicial settlement must be placed before the court, which applies the principles of Order 23, Rule 3 and passes a decree in its terms.

Normally unsuitable for ADR	Normally suitable for ADR
Representative suits; election disputes; probate matters; serious allegations of fraud, forgery or coercion; cases needing the court's protection, such as claims against minors or deities; criminal prosecutions.	Disputes about trade, commerce and contracts; disputes from soured relationships in families, neighbourhoods and workplaces.

Practical sequence: (1) know the dispute and exclude unfit cases; (2) ask whether the parties consent to arbitration or conciliation; (3) if not, send simple cases to a Lok Adalat and the rest to mediation, keeping judicial settlement for special cases.

The Main Forms of ADR

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• Negotiation: the simplest method, on which most others build. The parties or their representatives talk directly; there is no third person, and the parties control everything, including whether to agree.
• Mediation: assisted negotiation. A neutral mediator helps the parties communicate, understand each other's real interests and explore solutions, but cannot decide; the parties decide whether and on what terms to settle.
• Arbitration: private adjudication. The parties agree to submit the dispute to one or more arbitrators, who hear both sides and give a final and binding decision called an award, enforced like a court decree.
• Judicial settlement: a judge, usually other than the trial judge, acts as mediator or conciliator rather than adjudicator and guides the parties to a compromise, which the court records.

Conciliation

Very close to mediation, but the conciliator traditionally plays a more active role: under the Arbitration and Conciliation Act the conciliator may at any stage make proposals for a settlement, while a facilitative mediator does not suggest terms. In practice the words are often used interchangeably. A signed conciliation settlement under that Act has the same status and effect as an arbitral award on agreed terms. The Mediation Act, 2023 defines mediation to include conciliation, but its amendment replacing the conciliation provisions of the Arbitration and Conciliation Act is not in force, so conciliation under that Act continues.

Lok Adalat

The Lok Adalat ("people's court") is a uniquely Indian institution under the Legal Services Authorities Act, 1987.

• It takes up pending court cases and pre-litigation disputes.
• Members (serving or retired judicial officers, often with lawyers or social workers) try to bring the parties to a compromise.
• On settlement it makes an award deemed to be a decree of a civil court: final, binding, no appeal. In a settled pending case the court fee is refunded.
• It has no power to decide on merits; without a compromise it must return the case to the court for normal hearing.
• A settlement award can be challenged only on very limited grounds, and only by writ petition before the High Court.

Permanent Lok Adalat

Added to the Act in 2002 for public utility services: transport, postal and telephone services, supply of electricity and water, sanitation, hospitals and insurance. It can be approached before going to any court; its pecuniary limit is now ₹1 crore.

Point	Ordinary Lok Adalat	Permanent Lok Adalat
Function	Only conciliates.	Conciliates first, then adjudicates if necessary.
If no settlement	Must return the case to the court.	Can decide on merits, unless the dispute relates to an offence.
Award	Settlement-based; deemed decree; final, binding, no appeal.	Final, binding and deemed to be a decree.

Comparing the Methods Through One Dispute

Which Method Suits Which Dispute

There is no single best method.

Method	Suits
Negotiation	Parties who can still talk; issues mainly about money.
Mediation	Relationship matters (family businesses, long-term contracts) or emotions block communication.
Arbitration	Commercial disputes needing a binding decision, expertise, privacy and a neutral forum, especially international business.
Lok Adalat	Large numbers of simple claims, such as motor accident compensation and bank recovery.
Litigation	Public declaration of rights, binding precedent, protection of the public interest, serious crimes.

Advantages and Limitations of ADR

Advantages: usually faster and cheaper than litigation; flexible, since the parties shape the procedure; private; open to expert decision-makers; consensual methods preserve relationships and produce creative solutions that the parties own and so more often obey; and it reduces the burden on courts.

Limitations:

1. Consensual methods need both parties' willingness; one stubborn party can block a settlement.
2. Where one party is much stronger (a large company against a poor consumer), a private process may produce an unfair result.
3. ADR creates no precedents, so it cannot develop the law.
4. Some disputes are unsuitable: serious crimes, matters of public rights, and cases where minors or persons of unsound mind need the court's protection.
5. Arbitration has sometimes become as slow and expensive as litigation because awards are frequently challenged in court; hence Parliament amended the arbitration law several times to reduce delay.

Unit Two: Negotiation — Meaning and Nature

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Everyone negotiates daily — with a shopkeeper over price, with family over holiday plans, with friends over which film to watch.

Without a common interest there is nothing to talk about and the parties would simply fight; without a conflicting interest there is nothing to negotiate. Negotiation lives in the space between the two.

Features

• Voluntary — nobody can be forced to agree.
• Bilateral or multilateral — at least two parties.
• No neutral third person — the parties or their representatives deal directly.
• Informal — no fixed procedure.
• If the parties agree, the terms can be recorded in a contract, enforceable like any other contract.
• If they do not agree, each party is free to go to its next option — mediation, arbitration or court.

Importance for a lawyer

• The great majority of legal disputes are settled, not tried.
• Lawyers negotiate contracts, settlements, family arrangements and business deals.
• Negotiation is the foundation of mediation and conciliation, which are simply negotiations assisted by a neutral person.

Requisites of an effective negotiation

1. Both parties recognise that a problem exists and affects them both.
2. Each believes negotiation may give a better result than its other options.
3. There is room for agreement — at least some outcomes acceptable to both.
4. The people at the table have authority to agree, or quick access to someone who does.
5. A minimum level of trust and communication exists.
6. The timing is right. A party who still believes it will crush the other side in court is rarely ready to negotiate.

Positions and Interests

The difference between positions and interests is the most important idea in modern negotiation theory.

Position	Interest
What a party says it wants	Why it wants it — the underlying need, worry, fear or hope
Often incompatible	Frequently not incompatible

Distributive and Integrative Negotiation

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The two basic kinds of negotiation were described by Richard Walton and Robert McKersie in their study of labour negotiations in 1965.

Point	Distributive	Integrative
Basic idea	Dividing a fixed pie; every rupee one side gains is a rupee the other loses	Expanding the pie before dividing it; solutions creating additional value for both
When it arises	Single issue, no future relationship — e.g. buying a second-hand car from a stranger, where the only issue is price	Several issues that the parties value differently
Other names	Competitive, win-lose, zero-sum	Cooperative, collaborative, problem-solving, win-win
Main skills / method	Preparation, anchoring, careful concessions, keeping one's own limits secret	Trading issues the parties value differently

The negotiator's dilemma

Most real negotiations contain both elements: parties first work together to create value and must then still divide it. David Lax and James Sebenius called this tension the negotiator's dilemma — share information to create value and the other side may use it to claim more for itself; hide everything and you may never discover the joint gains. A skilful negotiator shares information step by step as trust grows.

Soft, Hard and Principled Negotiation

Roger Fisher and William Ury of the Harvard Negotiation Project wrote the most influential book on the subject, Getting to Yes (first published 1981). They describe three approaches; they recommend the principled approach.

Point	Soft	Hard	Principled
Participants treated as	Friends	Adversaries	Problem-solvers
Goal	Agreement	Victory	A wise outcome reached efficiently and amicably
Concessions / people	Makes concessions to keep the relationship	Demands concessions as a condition of the relationship	Soft on the people, hard on the problem
Trust	Trusts easily	Distrusts everyone	Proceeds independently of trust
Positions	Changes position easily	Digs into positions	Focuses on interests, not positions
Pressure	Gives in to pressure	Makes threats and applies pressure	Yields only to principle, not to pressure
Danger / result	Exploited by a hard negotiator	May win some battles but damages relationships; often no agreement, as the other side also digs in	Recommended by Fisher and Ury

The four principles of principled negotiation

Principled negotiation is also called negotiation on the merits or interest-based negotiation.

1. Separate the people from the problem. Negotiators have emotions, perceptions and ego; if the brothers in Cuttack feel insulted, they will reject even a fair offer. Deal with the people problem directly — listen, acknowledge feelings, let the other side save face — and deal with the substance separately.
2. Focus on interests, not positions. Ask why; ask why not. Identify the interests of both sides. The most powerful interests are basic human needs: security, economic well-being, recognition and control over one's life.
3. Invent options for mutual gain. Before deciding, generate many possible solutions without judging them (brainstorming). Look for shared interests and for differences that can be traded.
4. Insist on using objective criteria. Where interests truly conflict, decide not by a contest of will but by a fair standard independent of either side's will — market value, expert valuation, a court's likely decision, precedent, professional standards, or what similar parties have agreed.

BATNA, WATNA and MLATNA

Why BATNA matters

• Accept any deal better than your BATNA; reject any deal worse than it.
• A negotiator who does not know their BATNA negotiates blindly — accepting a bad deal out of fear, or rejecting a good one out of pride.
• The BATNA is the true source of negotiating power (Fisher and Ury): the better the alternative, the stronger you are at the table.
• So improve your BATNA before negotiating (e.g. find another buyer) and try to understand the other side's BATNA.

WATNA and MLATNA

In legal disputes the alternative is very often court or arbitration, whose result is uncertain. Mediators and lawyers therefore use two further ideas, added later and not found in Getting to Yes:

• WATNA — Worst Alternative to a Negotiated Agreement: if negotiation fails and I go to court, what is the worst realistic result?
• MLATNA — Most Likely Alternative to a Negotiated Agreement: what is the most probable result?

Worked example

Calculating these alternatives is a skill, not a definition. Prince, a furniture maker, claims ₹12 lakh still due from the hotel company of Farhan, who says the chairs were defective. A recovery suit will take about four years, and each side will spend about ₹3 lakh on lawyers and court costs.

Court outcome	Prince (claimant)	Farhan (hotel company)
Best case	Wins full ₹12 lakh with interest, but after four years and ₹3 lakh costs: realistic best is about ₹9 lakh plus interest, four years later — roughly his BATNA	Pays nothing, but spends ₹3 lakh on lawyers
Worst case (WATNA)	Court finds most chairs defective and awards almost nothing; a loss of about ₹3 lakh in costs	Pays ₹12 lakh plus interest plus own costs of ₹3 lakh — more than ₹15 lakh
Most likely (MLATNA)	His lawyer's assessment: part of the chairs found defective, about ₹8 lakh awarded; after costs about ₹5 lakh, four years from now	About ₹8 lakh plus ₹3 lakh costs — about ₹11 lakh

Best cases are unlikely, so a sensible party measures any offer against its most likely result. Prince should seriously consider any offer today better than about ₹5 lakh; Farhan should seriously consider paying anything less than about ₹11 lakh. Between ₹5 lakh and ₹11 lakh both are better off settling now — this range is the Zone of Possible Agreement. A settlement of about ₹8 lakh paid immediately beats four years of litigation for both: neither gets everything, but both avoid the risk of the worst case and save time and money.

Bargaining Range, Reservation Point and Aspiration

• Reservation point (walk-away point, bottom line) — the least favourable deal you will accept: for a seller the lowest acceptable price, for a buyer the highest price worth paying. Closely connected to the BATNA, by which it should be set.
• Aspiration point (target) — the best result you can reasonably hope for. A good negotiator opens near the aspiration point, not near the reservation point.
• Bargaining range — lies between the two sides' reservation points; the overlap is the Zone of Possible Agreement.

If the buyer's maximum is below the seller's minimum, there is no zone at all, and no clever talking will produce a deal unless one side changes its alternatives or new value is added.

Preparation and the Stages of a Negotiation

Preparation: the most important stage

Most negotiations are won or lost before the parties meet.

1. Identify your interests and rank priorities — what matters most, somewhat, and what can be given away.
2. Identify the other side's likely interests and priorities.
3. Gather information: facts, documents, market prices, the law, the likely result in court.
4. Work out your BATNA, WATNA and MLATNA, and estimate the other side's.
5. Set clear objectives — your target and reservation point.
6. Prepare objective criteria to support your proposals.
7. Plan logistics — who negotiates, who has authority to agree, where, when and in what language.
8. Think of options in advance, to arrive with ideas, not just demands.

Stages

Writers differ, but most negotiations follow a recognisable sequence:

1. Preparation.
2. Opening — parties meet, build rapport, agree how to proceed, state initial views.
3. Exploration / information exchange — questions, listening, understanding the other's interests.
4. Bargaining — options generated, offers and counter-offers exchanged, concessions made.
5. Closing — terms agreed and committed to.
6. Implementation — agreement written down clearly, signed and carried out.

Communication Skills

Negotiation is communication; the negotiator's most important tools are words and silence.

• Active listening — listening to understand, not merely waiting to speak: full attention, noticing the emotion behind the words, and summarising to show understanding.
• Questioning — the main way to gather information. Open questions invite explanation ("What concerns you most about this deal?"); closed questions confirm specific points ("Can you pay by March?"); why questions should be asked gently so they sound curious, not accusing.
• Persuasion — presenting proposals in terms of the other side's interests, supported by objective criteria.
• Emotional control — anger, pride and fear destroy judgment. Recognise your own emotions, avoid reacting to provocation, take breaks, and let the other side express emotions without treating them as attacks.
• Problem-solving — treating the dispute as a shared puzzle, not a battle.
• Building trust — the thread connecting all these skills. It grows by keeping small promises, sharing information gradually, behaving consistently and being honest about what you cannot do.

Power in Negotiation

Power is often taken to mean size or money — a large company negotiating with a small supplier seems to have all of it. But the most important source of power is the BATNA: a small supplier with three other buyers waiting has more power than a large company that urgently needs the goods and has no other source.

Other sources:

• Information — knowing more about the market, the facts or the law.
• Legitimacy — a proposal backed by law, precedent or fair standards is hard to resist.
• Time — the side under less time pressure can afford to wait.
• Relationships, reputation and expertise.
• Commitment — a party that can credibly show it cannot go below a certain figure may force the other side to adjust.

Assess the power of both sides honestly; do not confuse loud talk with real strength.

Anchoring, Offers and Concessions

Anchoring: the first number put on the table strongly influences the final result. Amos Tversky and Daniel Kahneman showed in 1974 that people's estimates are pulled towards any starting number, even an irrelevant one.

• A well-prepared negotiator who knows the market often benefits from an ambitious but defensible first offer, supported by objective reasons.
• An absurd anchor destroys credibility and may end the talks.
• If the other side anchors first with an extreme figure, do not negotiate around it; calmly refuse to treat it as a starting point and redirect to objective criteria.

Concessions (after opening offers and counter-offers):

• Plan them; do not make them in panic.
• Make them in decreasing size, signalling that you are approaching your limit.
• Trade every concession for something; never give it freely.
• Explain each by a principle, so it does not look like weakness.

Creating Options and Creating Value

Value is created in integrative negotiation by:

1. Trading issues valued differently — a buyer gives a longer contract period for a lower price.
2. Adding new issues — delivery schedules, warranties, future business.
3. Using differences in risk attitude — a fixed payment for one side, a share of profits for the other.
4. Contingent agreements — where parties disagree about the future, the price depends on what actually happens; e.g. a buyer of a business who doubts that profits will continue pays part of the price only if profits reach a stated level next year.

Creating value and claiming value go together; once the pie is bigger, objective criteria help divide it fairly.

Negotiation Theories and Models

Two theories have already been noted: the distributive and integrative theory of Walton and McKersie, and the principled negotiation model of Fisher and Ury.

Game theory: the shadow of the future

Cooperation depends on the shadow of the future. In a single deal between strangers, each side is tempted to grab as much as possible. When parties expect to deal with each other again and again, cooperation becomes the rational choice, because cheating today will be punished tomorrow. Hence negotiations within long relationships — family businesses, regular suppliers — are usually more cooperative.

Conflict styles: Thomas and Kilmann

Kenneth Thomas and Ralph Kilmann used two dimensions — concern for one's own goals and concern for the other side's goals — to describe five styles.

Style	Concern for self	Concern for other	Meaning
Competing	High	Low	Pursuing one's own goals with little concern for the other side
Accommodating	Low	High	Giving the other side what it wants
Avoiding	Low	Low	Staying away from the conflict
Compromising	Middle	Middle	The middle path, where each gives up something
Collaborating	High	High	Working together for a solution that fully satisfies both

No style is always right: avoiding may be wise for a trivial issue and competing may be necessary in a one-time deal, but for important disputes in continuing relationships collaborating usually produces the best results.

Tactics and Difficult Negotiators

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Hard tactics: extreme demands; good cop and bad cop (one aggressive, the other apparently reasonable); false deadlines; nibbling (asking for small extra concessions after the deal seems settled); claiming no authority and needing to check with someone else, so as to demand more later; and "take it or leave it".

Responding:

1. Recognise the tactic — once named calmly, it loses much of its force.
2. Refuse to play by those rules; return to interests and objective criteria.
3. Confirm, before beginning, that the person across the table has authority to settle.
4. Above all, never let pressure push you below your BATNA. A party that knows its alternative can always walk away politely.

Dealing with Deadlock

A deadlock is also called an impasse. Ways to break it:

• Take a break — tired and angry people do not think creatively.
• Change the format — e.g. from a large meeting to a small meeting of decision-makers.
• Reframe the problem — what would have to be true for each side to agree?
• Break a large issue into smaller parts and settle the easier ones first, building momentum.
• Return to objective criteria, or appoint an independent expert to value a disputed item.
• Go back to BATNA and MLATNA, reminding both sides of the cost of failure.
• If all fails, invite a neutral third person — which is exactly how negotiation turns into mediation.

Why Negotiations Fail

• Rigid positions, confused with interests.
• Poor preparation; not knowing one's own alternatives.
• Overestimating chances in court.
• Emotions, ego and the desire to save face blocking movement.
• Communication breakdown, each side assuming the worst of the other.
• One side lacking authority to agree.
• Lawyers or advisers with incentives different from their clients'.
• Real power imbalance, or no Zone of Possible Agreement at all.
• Wrong timing.

Each cause suggests its own cure, so a skilled negotiator or mediator diagnoses the cause before trying to fix it.

Ethics in Negotiation

Negotiation is not a licence to deceive. Not revealing information differs from actively lying: a negotiator need not disclose a reservation point, but must not make false statements about material facts.

Generally accepted in bargaining	Not acceptable
Not disclosing one's reservation point; ordinary sales talk about how valuable something is or how far one is willing to go	False statements about material facts — e.g. that the goods have passed a safety test

A lawyer who negotiates remains bound by professional duties of honesty towards the court and fairness towards the other side. Ethical negotiation also means respecting promised confidentiality, not exploiting a weaker party's ignorance or distress, and keeping one's commitments. In the long run, a reputation for honesty is a negotiator's greatest asset.

Qualities of a Good Negotiator

A good negotiator prepares thoroughly; knows their BATNA and priorities; listens more than they speak and asks good questions; is patient and controls their emotions; separates the people from the problem, staying firm on substance yet courteous to the person; is creative in finding options, honest and true to their word; understands power without abusing it; and knows when to settle and when to walk away.

The limit of negotiation: when parties are too angry to talk, communication has broken down, or each side is trapped in its position and cannot move without losing face, direct negotiation fails. The parties then need a neutral person who decides nothing but helps them talk — a mediator.

Unit Three: Mediation as Assisted Negotiation

▶ Watch this part of the lecture (1:00:30)

Everything about interests, options, BATNA and objective criteria applies here; the difference is that a skilled neutral person guides the conversation.

Development in India: mediation is now one of the most widely used dispute resolution methods in the world. India gave it statutory recognition through Section 89 of the Code of Civil Procedure, then added court-annexed mediation centres, pre-institution mediation in commercial cases and mediation in consumer disputes, and finally a complete law, the Mediation Act, 2023, only part of which is in force.

Why a neutral helps: the mediator is like a bridge. Parties who cannot speak to each other speak through the mediator, who calms emotions, translates accusations into concerns and carries proposals back and forth.

Essential Characteristics of Mediation

1. Voluntary in outcome. Even where a law or court sends parties to mediation, nobody can be forced to settle; a party may be required to attend, but the decision to agree remains free. Often the process itself is also voluntary, and a party can withdraw at any stage.
2. Collaborative — the parties work with the mediator to find a solution instead of fighting to win.
3. Party control of the outcome (self-determination) — the parties decide whether to settle and on what terms. A mediator who pressures a party into settling betrays the basic nature of mediation.
4. Mediator control of the process, flexibly — structure of meetings, order of speaking, ground rules, so that discussion is safe and productive.
5. Confidential — what is said is not to be used against a party later in court; without this protection nobody would speak openly.
6. Informal — no strict rules of evidence or procedure, no witness box, no cross-examination.
7. Impartial and neutral mediator.
8. Party ownership of the settlement — having created it themselves, parties are more likely to honour it than an order imposed from outside.

Mediation Compared with Other Processes

Comparison	The other process	Mediation
Adjudication (judge or arbitrator)	The neutral decides who is right according to law and evidence; the decision binds the parties	Nobody decides; focus on future solutions rather than past fault, and on interests and needs, not legal rights alone
Judge	Listens to evidence, applies law, imposes a decree; must not meet one party privately	May meet each party separately in confidence; does not find facts; has no power to impose anything
Arbitrator	Neutral chosen with the parties' consent or appointed according to law; decides and gives a binding award	Also such a neutral, but only facilitates
Negotiation	Consensual; the parties decide	Also consensual and the parties decide; the only difference is the neutral mediator, who manages communication, reduces emotional tension and helps parties see their alternatives realistically
Conciliation	Traditionally more active; under Part III of the Arbitration and Conciliation Act the conciliator may make proposals for settlement at any stage	In the classical facilitative style the mediator does not suggest terms

Mediation and conciliation: the line has always been thin, and many mediators also make suggestions. The definition of mediation in the Mediation Act, 2023 expressly includes conciliation, and that definition is in force; but conciliation is still governed by Part III of the Arbitration and Conciliation Act.

The Agreement to Mediate

Three routes into mediation:

1. By contract — a mediation clause requiring the parties first to try mediation before going to arbitration or court.
2. By agreement after the dispute has arisen.
3. By reference from a court or statute — a reference under Section 89 of the Code of Civil Procedure, pre-institution mediation in commercial disputes, or reference by a consumer commission.

Writing: The Mediation Act, 2023 would require a mediation agreement to be in writing, but that provision is not yet in force. Its present status is part of the law of mediation in India under that Act.

A well-drafted mediation clause states the disputes covered, how the mediator will be appointed, the institution or rules that apply, the place and language, the time limit, and what happens if mediation fails.

Disputes Suitable and Unsuitable for Mediation

Generally suitable	Generally unsuitable
Continuing relationships — family members, business partners, neighbours, landlords and tenants	Where a party needs a public declaration of rights or a binding precedent
High emotions and broken communication	Serious criminal offences
Scope for creative solutions — commercial contracts, partition of family property, intellectual property licences, employment disputes	Rights of the public or of persons not before the mediator — public interest questions, matters operating against the whole world
Many parties or many issues	Serious allegations of fraud or forgery requiring a full trial
Confidentiality important — business secrets, family reputation	Minors or persons of unsound mind whose interests need the court's protection; extreme power imbalance or a history of violence, unless strong safeguards exist

The First Schedule to the Mediation Act, 2023 lists matters not fit for mediation under that Act. It operates through Section 6, which is not yet in force.

Role and Qualities of a Mediator

Role

The mediator wears several hats: convener (brings the parties together); process manager (sets ground rules, structures discussion); communicator (helps each party hear the other); investigator of interests (uncovers what really matters); agent of reality (helps each party test its expectations against the risks of litigation); generator of options (encourages creative thinking); and finally helps put the agreement into clear, workable written terms. The mediator is not a judge, does not decide who is right, and must never force a settlement.

Qualities

• Independence — no financial, professional or personal relationship with either party that could influence the mediation.
• Impartiality — fair and even-handed treatment of both parties in attitude, words and behaviour.
• Neutrality towards the outcome — no favourite solution to push.
• Patience — mediation can be slow and parties often repeat themselves.
• Empathy — understanding how each party feels without taking sides.
• Integrity and trustworthiness — parties share confidential information only with someone they trust.
• Good judgment and creativity.
• Calm temperament — a mediator who gets angry loses control of the process.

Skills of a Mediator

These skills are learnt by practice.

• Listening — actively, with full attention to facts and feelings; parties who feel heard become calmer and more flexible.
• Summarising — briefly restating the main points after a party speaks; shows understanding, corrects misunderstanding, and lets the other party hear the story in a calmer form.
• Reframing — perhaps the most important skill: restating an accusation in neutral language focused on interests, so that it becomes a concern that can be discussed.
• Questioning — open questions to explore ("What would a good outcome look like for you?"), clarifying questions for details, hypothetical questions to open possibilities ("What if the payment were made in instalments?").
• Identifying interests — asking why, listening for emotions, noticing what a party keeps returning to.
• Managing emotions — allowing expression within limits, acknowledging emotions, and taking a break or private session when they threaten the process.
• Building trust and rapport — from the first minute: a respectful welcome, clear explanation of the process, honesty about confidentiality, even-handed treatment.
• Reality testing — not telling parties they will lose, but asking questions that make them think: What if the court does not accept your evidence? How long will the appeal take? What will it cost? BATNA, WATNA and MLATNA become practical tools. Usually done in private sessions so that no party loses face.
• Generating options — brainstorming without immediate judgment, then combining and improving ideas.
• Managing power imbalance — ensuring the weaker party participates meaningfully: encouraging legal advice, giving it time, making sure it understands proposals, and refusing to record an agreement plainly produced by pressure — without becoming its advocate, which would destroy impartiality.
• Facilitating communication and evaluation of proposals — ensuring each proposal is understood and examined against each party's interests and alternatives. The mediator may ask, "How does this offer compare with what you would likely get in court?" but should not say, "You must accept this offer."

Models of Mediation

By style

Facilitative	Evaluative	Transformative
The classical model. The mediator manages the process and helps the parties communicate and generate their own solutions, but gives no opinion on the merits and does not predict what a court would do.	The mediator — often an experienced lawyer or retired judge — assesses the strengths and weaknesses of each side's case and may suggest what a fair settlement would be.	Developed by Robert Baruch Bush and Joseph Folger. Aims less at settlement, more at changing how parties relate, through empowerment (strengthening each party's capacity to decide) and recognition (helping each understand the other's perspective). Useful in relationship disputes such as workplace and community conflicts.

The American scholar Leonard Riskin described facilitative and evaluative mediation as two ends of a range, along which a mediator may move.

By organisation

• Ad hoc — arranged directly by the parties, who choose a mediator and agree on the procedure without any institution.
• Institutional — under the rules and administration of a mediation institution, which provides trained mediators, facilities, fixed fees and standard procedures.
• Court-annexed — in a mediation centre attached to a court, by mediators trained and empanelled by the court, usually in cases referred by the court. India's first court-annexed centre was inaugurated at the Madras High Court in 2005; many High Courts and district courts now have one. The Delhi High Court's centre, Samadhan, is a well-known example.

The Mediation Process from Beginning to End

▶ Watch this part of the lecture (1:15:31)

1. Preparation. The mediator checks for conflicts of interest and makes the necessary disclosure, studies the court file, arranges a suitable room, ensures that those attending have authority to settle, and invites a party's lawyer if the party is represented.
2. Opening and introductory statement. The mediator welcomes everyone, introduces himself and explains the process simply: he is neutral and will decide nothing; the process is confidential; he may meet each party separately and will not share what is told privately without permission; any settlement is voluntary. He sets ground rules (one person speaks at a time; no insults). This statement builds trust and sets the tone.
3. Statements by the parties. Each tells its story without interruption. Aadil says he has looked after the building for fifteen years and paid for repairs; Farhan says it is old and its value will fall unless sold now; Zoya feels cheated because she never saw any accounts. The mediator listens, summarises and reframes accusations into concerns.
4. Identifying issues and gathering information. Issues: the future of the building, past rent and expenses, and the shop. Gap-filling questions: what repairs were done and at what cost; what is the market value? Parties may agree to bring documents or obtain a valuation.
5. Joint and private sessions. Joint sessions (all parties present) allow direct communication and a shared understanding of facts. Zoya may be unwilling to admit before Aadil that she urgently needs money for her daughter's education, so the mediator holds private sessions (caucuses), where parties speak frankly about real interests, fears and limits, and where reality testing is done — what if the partition suit runs another eight years? What is said privately stays with the mediator unless that party permits disclosure.
6. Identifying interests and generating options. Aadil's deepest interest is keeping his shop, his livelihood; Farhan's is liquidity, to start a business; Zoya needs money for her daughter and recognition that she was treated unfairly. Options appear that no court could order in a partition suit: Aadil keeps the ground floor and buys out Farhan's share with a bank loan; the upper floors are sold; Zoya receives her share of the sale plus an agreed lump sum for past rent, set off against repair costs Aadil proves with bills.
7. Negotiation, reality testing and settlement. Moving between joint and private sessions, the mediator keeps testing each proposal against each party's alternatives in court until, step by step, agreement is reached.
8. Drafting the settlement agreement. A settlement is only as good as its drafting. Terms must be clear, complete, specific and enforceable: who does what, by which date, how payment is made, what happens on default, how costs and taxes are shared, which pending cases are withdrawn, and how future disputes are resolved — in simple language, signed by the parties. A vague promise to cooperate in good faith is a recipe for a new dispute. The mediator must not draft terms that are illegal or that the parties do not understand. In a court-referred mediation, the settlement is placed before the court, which disposes of the case in terms of the settlement.
9. Closure without settlement. Not every mediation ends in agreement. Parties may settle some issues and not others; such a partial settlement still narrows the dispute for the court. Where there is no settlement, the mediator closes politely and reports to the court only that mediation has failed — not what was said or who was responsible. The parties return to court, and what was said in mediation is not to be used against them there.

Mediation Ethics and the Code of Conduct

A mediator holds a position of trust, so ethics are at the heart of mediation.

• Impartiality and independence — fairness to all parties throughout, avoiding any appearance of bias, equal respect; a mediator who at any stage feels unable to remain impartial must withdraw.
• Conflict of interest and disclosure — before accepting and throughout, disclose any circumstance that could raise a reasonable doubt about independence or impartiality, such as a past professional relationship with a party, a financial interest in the outcome or a family connection. The parties then decide whether they still want the mediator; if the conflict is serious, the mediator must decline.
• Confidentiality — everything in mediation is confidential except where the parties agree otherwise or the law requires disclosure; no sharing of private-session information without permission; no later evidence about what was said.
• Self-determination and informed consent — no coercion, threats or misleading; parties must understand the terms and their consequences; encourage independent legal advice where needed, especially for an unrepresented party.
• Competence — accept only matters one is trained and competent to handle.
• Fees and conduct — transparency about fees; no gifts or favours from parties; no use of mediation information for personal benefit.
• Avoiding conflicting roles — not later acting as arbitrator, lawyer or witness for any party in the same dispute.
• Respect for dignity — courtesy to every participant, whatever their education, wealth or status.

Sources of these standards

• Rules and codes of conduct of court-annexed mediation centres.
• Training material prepared by the Mediation and Conciliation Project Committee of the Supreme Court.
• The Mediation Act, 2023, which provides for ethical standards to be laid down by the new Mediation Council of India; until its regulations are made, Section 57 keeps the existing court-annexed rules in force.

The Law Governing Mediation in India

▶ Watch this part of the lecture (1:23:48)

Before the Mediation Act

Mediation law was scattered: Section 89 of the Code of Civil Procedure (CPC) and High Court rules for court-annexed mediation; the Arbitration and Conciliation Act for conciliation; the Commercial Courts Act for pre-institution mediation; and the Consumer Protection Act, 2019 for consumer mediation cells. No general law defined mediation, a mediator's conduct, the protection of confidentiality, or the enforcement of private settlements. Parliament therefore passed the Mediation Act, 2023 (President's assent, September 2023).

Caution: passed, but largely not in force

Provisions commence on dates the Central Government notifies. The notification of 9 October 2023 brought into force only:

• Section 1 and the definitions in Section 3;
• the protection of the Lok Adalat in Section 26;
• the Mediation Council provisions (Sections 31 to 38);
• Sections 45 to 47 (the Mediation Fund, accounts and audit, and the Central Government's power to issue directions);
• Sections 50 to 54 (protection of action taken in good faith, the powers to make rules and regulations, laying, and removal of difficulties);
• two transitional provisions, Sections 56 and 57.

On 27 August 2026, the Central Government notified the establishment of the Mediation Council of India, an essential first step, since much of the Act depends on regulations the Council must still make. The heart of the Act is still not in force: pre-litigation mediation, the mediation agreement, confidentiality, enforcement and challenge of settlement agreements, online and community mediation, and every amendment to other laws.

Law applicable today: courts still refer cases under the existing Section 89 CPC; court-annexed mediation continues under High Court rules, which Section 57 keeps alive until the Council makes regulations on the conduct of mediation; conciliation continues under the Arbitration and Conciliation Act; pre-institution mediation under the Commercial Courts Act continues in its 2018 form; and consumer mediation continues under the Consumer Protection Act.

Objectives and Framework of the Mediation Act, 2023

Objectives: to promote institutional mediation, make mediated settlement agreements enforceable, and give India one coherent law on mediation.

Application (Section 2, not in force): mediation conducted in India where the parties are based in India, or their agreement chooses the Act, or the mediation is international (a commercial dispute with at least one foreign party); also commercial disputes to which the Government or a body under its control is a party, and other notified disputes. Sections 4 to 30 (mediation agreement, mediators, confidentiality, enforcement) are not in force either, except Section 26.

The Mediation Agreement and Pre-litigation Mediation

Mediation agreement (Section 4): must be in writing; may be a contract clause or a separate agreement. Like an arbitration agreement, it may be contained in a signed document or an exchange of letters or electronic communications, or arise from pleadings where one party alleges it and the other does not deny it.

Pre-litigation mediation (Section 5): mediation before any suit is filed, to settle a civil or commercial dispute voluntarily and with mutual consent, whether or not there is a mediation agreement. The original Bill proposed it as compulsory; Parliament made it voluntary. Exception: for commercial disputes of the specified value it must follow Section 12A of the Commercial Courts Act, which is mandatory. Notified tribunals are also covered.

Disputes Not Fit for Mediation (Section 6 and the First Schedule)

Section 6 says mediation under the Act shall not be conducted for any dispute in the indicative list in the First Schedule, which the Central Government can amend:

• disputes that some other law does not allow to be mediated;
• claims against minors, deities, persons with intellectual disabilities, persons with mental illness and persons of unsound mind; suits for declaration of title against the Government; declarations that operate in rem;
• prosecution for criminal offences;
• proceedings before statutory bodies on the registration, discipline or misconduct of professionals such as lawyers and doctors;
• disputes affecting the rights of third parties who are not part of the mediation, except matrimonial disputes involving the interest of a child;
• matters within the jurisdiction of the National Green Tribunal;
• levy and collection of taxes, tax penalties and tax offences;
• proceedings under the Competition Act, and before the telecom regulator and its appellate tribunal, the electricity commissions and their appellate tribunal, the petroleum and natural gas regulator, and SEBI and the Securities Appellate Tribunal;
• land acquisition and compensation;
• any other matter the Central Government notifies.

Qualification: a court may still refer compoundable offences, including compoundable matrimonial offences, to mediation; the outcome is not treated as a decree, and the court considers it under the ordinary law.

Section 7: a court or tribunal may refer the parties to mediation at any stage of a proceeding and pass a suitable interim order to protect any party, but the parties are under no obligation to settle.

Mediators, Conduct and Time Limits

• Eligibility: a person of any nationality; a foreign mediator needs the qualifications and accreditation specified by the regulations.
• Appointment: by the parties, or by a mediation service provider within seven days.
• Disclosure: before mediation begins, the mediator discloses in writing any circumstance (such as a personal, professional or financial interest) that may cause a conflict of interest or raise doubts about independence or impartiality. The parties may waive the objection in writing or ask for a replacement, appointed within seven days.
• Conduct (Sections 15 to 17) gives statutory form to mediation ethics. The mediator is not bound by the CPC or the law of evidence; is guided by objectivity and fairness; protects the parties' voluntariness, confidentiality and self-determination; shall not impose a settlement or promise that the mediation will succeed; and may not act as arbitrator, representative or counsel in a proceeding on the same dispute, or be presented as a witness in one.
• Time limit (Section 18): 120 days from the date fixed for the first appearance before the mediator, extendable by agreement by not more than 60 days.

Confidentiality and Privilege

Confidentiality (Section 22) binds the mediator, service provider, parties and all participants. It covers every acknowledgement, opinion, suggestion, promise, proposal, apology and admission; a party's willingness to accept a proposal; documents prepared only for the mediation; and any other mediation communication. No audio or video recording may be made, in person or online, and none of this material may be relied on as evidence in any arbitral or judicial proceeding.

Privilege (Section 23): no mediator or participant can be compelled to disclose to a court or tribunal what was said in the mediation. There is no privilege for information needed to prove or disprove a professional misconduct complaint against the mediator; a threat or plan to commit an offence; information about domestic violence or child abuse; or statements showing a significant and imminent threat to public health or safety.

The Mediated Settlement Agreement

• It may cover matters beyond the disputes referred, but an agreement void under the Indian Contract Act is not a valid mediated settlement agreement.
• It is signed by the parties, then authenticated by the mediator, who gives each party a copy.
• Section 20: the parties may register it, for the purpose of record, with a legal services authority or another notified body within 180 days.
• Section 21: if there is no settlement, the mediator submits a non-settlement report that does not disclose why the mediation failed.
• Section 27 (not in force): the agreement is final and binding on the parties and those claiming under them; it is enforced under the CPC as if it were a judgment or decree of a court, subject to Section 28; and it can be relied on as a defence or set-off in any proceeding. This matters because today a purely private mediation settlement is only a contract, so a party who breaks it must be sued afresh.
• Section 28 (not in force): challenge only on four grounds: fraud, corruption, impersonation, or mediation of a dispute not fit for mediation under Section 6. It must be filed within 90 days of receiving the copy; the court may allow a further 90 days for sufficient cause.
• Section 29: time spent in mediation is excluded when computing limitation.

Online Mediation, Community Mediation and the Mediation Council

Online mediation is recognised by Section 30, which is not in force.

Community mediation (Sections 43 and 44, not in force): a dispute likely to disturb peace and harmony among the families or residents of a locality may be settled this way, with the parties' prior consent. On a party's application, the legal services authority (or, where there is none, the District Magistrate or Sub-Divisional Magistrate) constitutes a panel of three community mediators, who may be respected persons of the locality, representatives of resident welfare associations, or others with experience. The settlement may be reduced to writing but is not enforceable as a judgment or decree, because its purpose is only to maintain peace in the community.

Mediation Council of India: a body corporate with its head office in Delhi. Under Section 32 it has a chairperson, two expert members, two government secretaries as ex officio members, a chief executive officer and a part-time member from industry. Its functions under Section 38 include registering mediators, recognising service providers and institutes, setting ethical standards, and keeping an electronic depository of settlement agreements. These provisions are in force, but many functions await regulations.

Other features: the Act does not apply to proceedings before a Lok Adalat or a Permanent Lok Adalat, or to mediations or conciliations begun before it came into force. Once operative, its Schedules will amend Section 28 of the Contract Act, Section 89 CPC, the conciliation part of the Arbitration and Conciliation Act, Section 12A of the Commercial Courts Act and the mediation chapter of the Consumer Protection Act. India signed the Singapore Convention on international mediated settlement agreements in 2019 but has not ratified it, and the Mediation Act does not give effect to it.

Pre-institution Mediation under the Commercial Courts Act

▶ Watch this part of the lecture (1:38:38)

This provision is fully in force and very important in practice. The Commercial Courts Act, 2015 set up commercial courts for disputes of a specified value, now ₹3 lakh or more. Section 12A was inserted in 2018, with effect from 3 May 2018:

• A suit that does not contemplate urgent interim relief cannot be instituted until the plaintiff has exhausted pre-institution mediation under the rules.
• The mediation is conducted by authorities constituted under the Legal Services Authorities Act, within three months of the plaintiff's application, extendable by two months with the parties' consent. This time is excluded from limitation.
• A settlement is written down and signed by the parties and the mediator. It has the same status and effect as an arbitral award on agreed terms under Section 30 of the Arbitration and Conciliation Act, so it can be enforced like a decree.
• Under the Pre-Institution Mediation and Settlement Rules, 2018, the plaintiff applies to the authority and notice goes to the other side. If the other side does not appear or refuses to mediate, the authority issues a non-starter report, and the plaintiff may then sue.

In 2025, the Supreme Court confirmed that suits filed before that date without mediation are not to be rejected, but kept pending while the parties are sent to mediation.

Meaning of "contemplating urgent interim relief"

Left open in Patil Automation, this was later explained by the Supreme Court: the court must look at the plaint as a whole (the nature of the suit, the cause of action and the relief claimed) from the standpoint of the plaintiff. The plaintiff needs no leave of the court to skip mediation, but a prayer for urgent relief must not be a mere disguise to avoid mediation, and the court can check for such camouflage.

Mediation in Consumer Disputes

Section 37, Consumer Protection Act, 2019: at the first hearing after a complaint is admitted, or at any later stage, if the District Commission sees elements of a settlement acceptable to the parties, it may direct them to give written consent to mediation within five days; on consent, it refers the dispute to mediation within five days.

Machinery (Chapter V):

• a consumer mediation cell is attached to each District Commission, State Commission and the National Commission, with a panel of mediators chosen on a selection committee's recommendation, for five years;
• the mediator must disclose any conflict of interest and follow the principles of natural justice;
• a settlement is written down and signed by the parties or their authorised representatives, and the mediator sends it to the Commission with a settlement report;
• within seven days of the report, the Commission passes an order recording the settlement and disposes of the matter; if only some issues settle, it records those and hears the rest;
• Section 41 bars an appeal against such an order, because the parties themselves agreed to it.

Excluded by the Consumer Protection Mediation Rules, 2020: medical negligence resulting in grievous injury or death; serious and specific allegations of fraud, fabrication, forgery, impersonation or coercion; criminal prosecution for non-compoundable offences; and cases involving public interest or numerous persons who are not parties.

Consent and Enforcement: Putting It Together

Consent is the foundation of every mediation: a court or a law may send parties to the mediation table, but the settlement itself must be voluntary.

Settlement reached in	How it is enforced
Lok Adalat	The award is deemed to be a decree.
Court-referred mediation	Placed before the court, which passes a decree in its terms.
Conciliation under the Arbitration and Conciliation Act	Status of an arbitral award on agreed terms.
Pre-institution mediation under the Commercial Courts Act	Status of an arbitral award on agreed terms.
Consumer mediation	Through the order of the consumer commission.
Purely private mediation	For now only a contract, until Section 27 of the Mediation Act comes into force.

Drafting a Mediation Settlement Agreement

A good settlement agreement identifies the parties correctly; describes the dispute briefly; records that it is voluntary and understood; states each obligation precisely (who will do what, by which date and in what manner); says what happens on default; provides for withdrawal of pending cases and complaints; deals with costs; keeps the discussions confidential; and states how any future dispute about it will be resolved. It must be lawful, because calling a void agreement a settlement does not save it. The parties sign it and, where the forum requires, the mediator signs or authenticates it.

Arbitration: Meaning and Governing Law

▶ Watch this part of the lecture (1:46:36)

Arbitration is governed by the Arbitration and Conciliation Act, 1996, as amended in 2015, 2019 and 2021; section numbers in the arbitration topics refer to it unless stated otherwise. Part I deals with arbitration seated in India; Part II with the enforcement of certain foreign awards, especially New York Convention awards; Part III with conciliation. The Mediation Act, 2023 is meant to replace Part III, but that change is not in force, so Part III still operates.

Characteristics of Arbitration

Arbitration has six features:

1. Consensual, except where a statute itself provides for arbitration.
2. Adjudicatory.
3. The award is final and binding.
4. Wide party autonomy over procedure, arbitrators, place and language.
5. Private.
6. Courts play only a limited and supportive role.

Arbitration Compared with Litigation, Mediation and Conciliation

Arbitration and litigation are both adjudicatory and both end in a binding decision, but:

Point	Litigation	Arbitration
Decision-maker	Judge appointed by the State	Arbitrator chosen by the parties; may be an expert
Procedure	Fixed by the CPC and the law of evidence	Designed by the parties
Hearings	Public	Private
Review	Appeals lie to higher courts	No appeal on the merits; award set aside only on narrow grounds

International business also prefers arbitration, because neither party has to submit to the courts of the other.

Point	Arbitration	Mediation	Conciliation
Role of the neutral	Decides	Only helps the parties decide	May propose terms
Outcome	Binding award	A settlement both accept, or no result at all	Parties may reject the proposed terms

Kinds of Arbitration

Domestic arbitration: seated in India, with all parties Indian.

International commercial arbitration (Section 2(1)(f)): an arbitration over a legal relationship considered commercial under Indian law, where at least one party is an individual who is a foreign national or habitually resident abroad; a body corporate incorporated outside India; an association or body of individuals whose central management and control is exercised outside India; or the government of a foreign country.

Foreign-seated arbitration: the juridical seat is outside India, for example Singapore, London or Paris. The award is a foreign award and, if made in a New York Convention country notified by India, is enforced in India under Part II.

Ad hoc arbitration	Institutional arbitration
Arranged and managed by the parties themselves, without any institution; they appoint the arbitrators, agree on the procedure and pay the arbitrators directly.	Conducted under the rules and administration of an institution, such as the International Chamber of Commerce (ICC), the Singapore International Arbitration Centre and the London Court of International Arbitration; in India, the Mumbai Centre for International Arbitration and the India International Arbitration Centre in Delhi.
Flexible and can be cheaper, but if the parties do not cooperate, only the court can move the process forward.	Ready rules, a panel of arbitrators, a way to appoint arbitrators if a party defaults, fixed fees and administrative support; costs more in administrative fees but is usually more predictable.

Fast-track arbitration (Section 29B, introduced in 2015): the parties may agree in writing, at any stage up to the appointment of the tribunal, to have the dispute decided on written pleadings, documents and submissions without an oral hearing; a hearing is held only if all parties request it or the arbitrator considers it necessary. They may agree on a sole arbitrator. The award must be made within six months from the date the arbitrator enters upon the reference. It suits smaller disputes turning mainly on documents.

The Arbitration Agreement

▶ Watch this part of the lecture (1:53:30)

Essentials:

1. Writing: a document signed by the parties; an exchange of letters or other telecommunication, including electronic communication, recording the agreement; or pleadings, where one party alleges an arbitration agreement in the statement of claim and the other does not deny it in the defence. An oral agreement is not enough.
2. Clause or separate agreement: most are clauses on future disputes, but a separate agreement can be made after a dispute has arisen.
3. Clear intention to submit disputes to arbitration and be bound by the decision; courts look at substance, not label. A clause that the parties may, if they wish, refer disputes to arbitration has been treated by the Supreme Court as showing no firm intention, only an agreement to consider arbitration in the future.
4. Certainty: the disputes covered and the method of appointing arbitrators should be identifiable. Courts try to save badly drafted clauses, but a vague one may fail.
5. Capacity: a minor or a person of unsound mind cannot make a valid arbitration agreement; companies, firms, the Government and public sector bodies can, subject to their own rules.
6. Arbitrability of the subject matter.

Incorporation by reference (Section 7(5)): a written contract may refer to another document containing an arbitration clause, which becomes part of the contract if the reference shows an intention to adopt it. A mere general reference to another contract between different parties will not always be enough.

Separability and Competence-Competence

Both doctrines are found in Section 16 and protect the arbitration agreement from being easily defeated.

Competence-competence: the tribunal has the competence to decide its own competence, including any objection about the existence or validity of the arbitration agreement. A plea of lack of jurisdiction must be raised no later than the statement of defence. If the tribunal accepts the plea and holds it has no jurisdiction, an appeal lies to the court; if it rejects the plea, it continues and makes the award, which the aggrieved party can challenge under Section 34.

Arbitrability

Arbitrability asks whether a particular dispute is legally capable of being decided by a private tribunal; not every dispute can go to arbitration even if the parties agree. Arbitration is a private process created by contract, and some matters are so closely connected with the public interest, or with the rights of non-parties, that only a public court should decide them. An award on a non-arbitrable matter can be set aside under Section 34.

Traditionally non-arbitrable: criminal offences; matrimonial disputes such as divorce; guardianship; insolvency and winding up; testamentary matters such as probate; and tenancy matters under special rent control statutes giving exclusive jurisdiction to specified courts.

Later decisions distilled these exceptions into two questions: does the fraud permeate the entire contract, including the arbitration agreement? Does it go beyond the private affairs of the parties into the public domain?

The fourfold test

▶ Watch this part of the lecture (2:00:28)

A dispute is not arbitrable when:

1. the cause of action relates to actions in rem that do not concern subordinate rights in personam;
2. it affects third-party rights, has effect against the whole world, or requires centralised adjudication;
3. it relates to inalienable sovereign and public interest functions of the State; or
4. a statute expressly or by necessary implication makes it non-arbitrable.

Other holdings: disputes under rent control laws giving exclusive jurisdiction to a special forum, and claims belonging to the Debts Recovery Tribunal, are not arbitrable. The older view that serious allegations of fraud must go to a civil court was overruled: fraud in a civil dispute can be arbitrated, and is non-arbitrable only where it vitiates the arbitration agreement itself or the dispute otherwise fails the fourfold test. The tribunal is the first authority to decide arbitrability; the referral court steps in only when the dispute is manifestly non-arbitrable. As Justice N. V. Ramana's concurring opinion put it, "when in doubt, do refer".

Judicial Referral to Arbitration

When a party ignores an arbitration agreement and files a civil suit:

• Section 8 (Part I): a party to the agreement, or a person claiming through or under that party, may apply no later than its first statement on the substance of the dispute, with the original agreement or a certified copy. The court shall refer the parties to arbitration unless, prima facie, there is no valid arbitration agreement; reference is mandatory, not discretionary. The opening words, added in 2015, make this duty operate despite any earlier judgment, decree or order of any court, including the Supreme Court. The arbitration may be commenced, and an award made, while the application is pending.
• Section 45 (New York Convention agreements): the judicial authority must refer the parties unless it prima facie finds the agreement null and void, inoperative or incapable of performance. The words "prima facie" came into this section in 2019, not in 2015.

Sukanya was never formally overruled, but its practical force has largely gone. In 2015, on the Law Commission's recommendation, Section 8 was amended to make reference mandatory unless there is prima facie no valid arbitration agreement, even against earlier Supreme Court judgments; and later decisions distinguished Sukanya where several agreements form one composite transaction.

The same problem of non-signatories arose in an international setting, where the Supreme Court took a broader view.

Party Autonomy

Party autonomy is the principle that the parties are free to shape their arbitration as they wish, and the Act gives effect to it throughout. The parties may choose the number of arbitrators, provided it is not even (failing a choice, there is a sole arbitrator); agree on how arbitrators are appointed, the procedure, the place and the language; in an international commercial arbitration, choose the substantive law governing the dispute; choose an arbitral institution and its rules; agree that the award need not give reasons; and expressly authorise the tribunal to decide as an amiable compositeur, according to fairness.

Limits:

1. Mandatory provisions cannot be excluded; the most important is Section 18, which requires equal treatment of the parties and a full opportunity for each to present its case.
2. An agreement cannot override public policy.
3. In a domestic arbitration seated in India, the tribunal must apply Indian substantive law.
4. The arbitrator's independence and impartiality cannot be bargained away, except by an express written waiver made after the dispute has arisen.
5. The parties cannot give the tribunal power to decide a non-arbitrable dispute.

Seat, Venue and Jurisdiction

▶ Watch this part of the lecture (2:12:29)

Seat	Venue
The juridical home, the legal centre of gravity of the arbitration; a legal, not geographical, concept.	Simply the physical place where hearings are held for convenience.
The law of the seat governs the proceedings; the courts of the seat have exclusive supervisory jurisdiction, so only they can hear an application to set aside the award.	Hearings may be held elsewhere without changing the seat.

The seat decides which country's law governs the procedure, which courts can supervise and annul the award, and whether the award is domestic or foreign. Section 2(2) says Part I shall apply where the place of arbitration is in India: the territoriality principle, under which the arbitration law of the seat applies. For many years, however, Indian law took a very different view.

BALCO's own appeal shows how this worked: in January 2016, a three-judge bench decided it under the old law, holding that English law governed the arbitration agreement, so the parties had impliedly excluded Part I. BALCO's challenge in India failed.

Seat, Venue and Party Autonomy after BALCO

BALCO made India a seat-centred jurisdiction. Its remark that cause-of-action courts might share supervisory jurisdiction with seat courts was later corrected: today the courts of the seat alone exercise it.

Interim relief in foreign-seated arbitrations: proviso to Section 2(2)

BALCO left a gap that Bhatia International had tried to fill.

The 2015 amendment added a proviso to Section 2(2): unless the parties agree otherwise, Section 9 (interim measures), Section 27 (court assistance in taking evidence) and the related appeal provisions also apply to an international commercial arbitration seated outside India, if its award will be enforceable under Part Two.

Can two Indian parties choose a foreign seat?

Venue or seat?

Contracts often use "venue" or "place" loosely. Later Supreme Court decisions hold that if a clause says the proceedings shall be held at a named place, names no other place as the seat, and nothing significant points the other way, that venue is in law the seat. Once the seat is fixed, its courts have exclusive supervisory jurisdiction; parties cannot go to another court merely because part of the cause of action arose there.

Limited Judicial Intervention (Section 5)

Notwithstanding any other law, in matters governed by Part One, no judicial authority may intervene except as Part One provides. This is the principle of minimum judicial intervention: courts support and supervise arbitration, but act only through the doors the Act opens:

• referral to arbitration (Section 8);
• interim measures (Section 9);
• appointment of arbitrators (Section 11);
• termination of an arbitrator's mandate in some cases (Section 14);
• assistance in taking evidence (Section 27);
• extension of the time limit (Section 29A);
• setting aside (Section 34), enforcement (Section 36) and appeals (Section 37).

Interim Measures by the Court and by the Tribunal

▶ Watch this part of the lecture (2:22:02)

By the court: Section 9

A party may apply to a court before the arbitral proceedings, during them, or after the award but before it is enforced. The court may appoint a guardian for a minor or a person of unsound mind for the arbitration, and may order interim protection such as preservation or sale of goods, securing the amount in dispute, detention or inspection of property, an injunction, or a receiver.

Two rules added in 2015 to push parties towards the tribunal:

1. If the court grants relief before arbitration begins, the arbitral proceedings must start within 90 days or such further time as the court fixes.
2. Once the tribunal is constituted, the court may entertain a Section 9 application only if the remedy before the tribunal would not be efficacious.

By the tribunal: Section 17

The tribunal can grant interim measures of the same kinds during the arbitral proceedings. Before 2015 its orders were difficult to enforce; now Section 17 treats them as orders of the court for all purposes, enforceable under the Code of Civil Procedure.

Point	Court (Section 9)	Tribunal (Section 17)
When	Can act even before the tribunal exists	Only once constituted
Powers	Uses its coercive powers directly	Acts only between the parties, but knows the dispute better
Role once tribunal is in place	Backup	Primary forum

Emergency arbitrator

Arbitral institutions provide for an emergency arbitrator who can grant urgent relief before the full tribunal is formed. The Supreme Court has held that in Indian-seated arbitrations where the parties adopted such institutional rules, the emergency order is treated as a Section 17 order and enforced accordingly.

Constituting the Arbitral Tribunal (Section 11)

The parties may agree on the appointment procedure. Failing that, Section 11 provides a default:

• Three arbitrators: each party appoints one; the two appoint the third, who is the presiding arbitrator.
• If a party fails to appoint within 30 days of a request, or the two fail to agree on the third within 30 days, a party may apply to court: the Supreme Court in an international commercial arbitration, the High Court in other cases. The court may act through a person or institution it designates.
• Sole arbitrator: the same route applies if the parties cannot agree within 30 days.

Scope of the court's examination

Under Section 11(6A) (inserted 2015), the court must confine itself to the existence of an arbitration agreement. The 2019 attempt to omit this sub-section, along with the plan for arbitral institutions to handle appointments, has never been brought into force. In 2023 a seven-judge bench confirmed that the court only checks whether an arbitration agreement prima facie exists; questions such as proper stamping are for the tribunal under its competence-competence power. A later ruling left to the tribunal the plea that the claim was already settled.

Independence, Impartiality and Disclosure (Section 12)

An arbitrator is a judge chosen by the parties, so independence and impartiality are essential. A person approached to be an arbitrator must disclose in writing:

1. any past or present relationship with a party, or interest in the subject matter, likely to raise justifiable doubts about his independence or impartiality; and
2. anything likely to affect his ability to devote sufficient time and finish the arbitration within 12 months.

He may be challenged on these grounds, or if he lacks the qualifications the parties agreed.

The Seventh Schedule lists relationships so serious that the person is ineligible, e.g. being an employee, consultant, adviser or director of a party, or having a significant financial interest in a party or in the outcome. Under Section 12(5) such a person cannot be appointed even if the parties agreed otherwise earlier. The only escape is an express written agreement made after the dispute has arisen waiving the ineligibility. If an ineligible person acts, his mandate terminates under Section 14, as he is legally unable to perform his functions.

Schedule	Function
Fifth (added 2015)	Guides whether justifiable doubts exist (ground for challenge)
Sixth	Form of disclosure
Seventh (added 2015)	Relationships making a person ineligible (Section 12(5))

Unilateral appointment clauses

Common clauses let one party alone choose the arbitrator, or a panel from which the other must pick. Earlier decisions held that (i) a person who is himself ineligible, such as a party's managing director, cannot act as arbitrator or nominate one; and (ii) a party with an interest in the outcome cannot unilaterally appoint a sole arbitrator.

Challenge to an Arbitrator (Sections 13 and 14)

• The parties may agree on a challenge procedure (Section 13).
• Failing that, the challenger sends a written statement of reasons to the tribunal within 15 days of learning of its constitution or of the circumstances.
• Unless the arbitrator withdraws or the other party agrees, the tribunal decides the challenge.
• If it fails, the tribunal continues and makes an award; the challenger may raise the point in a Section 34 application.
• Where an arbitrator is de jure ineligible under the Seventh Schedule, a party may approach the court under Section 14 to declare his mandate terminated.

Conduct of Arbitral Proceedings

▶ Watch this part of the lecture (2:30:19)

• Equal treatment (Section 18): each party must be treated equally and have a full opportunity to present its case. This is the procedural heart of arbitration; an award made in breach can be set aside.
• Flexibility (Section 19): the tribunal is not bound by the Code of Civil Procedure or the law of evidence. The parties may agree on procedure; failing that, the tribunal conducts proceedings as it considers appropriate, including admissibility, relevance, materiality and weight of evidence. Natural justice still applies.
• Place, commencement, language: the parties may agree on place and language, failing which the tribunal decides. Unless agreed otherwise, proceedings commence when the respondent receives a request to refer the dispute to arbitration.
• Pleadings and hearings: statement of claim, statement of defence and any counter-claim. Since 2019 pleadings must be completed within 6 months of the arbitrators receiving written notice of appointment. The tribunal may decide on documents, but must hold oral hearings at an appropriate stage if a party requests, unless agreed otherwise. Hearings should run day to day, without adjournments absent sufficient cause.
• Default (Section 25): claimant fails without sufficient cause to file its claim, proceedings are terminated; respondent fails to file a defence, proceedings continue without treating it as an admission; a party fails to appear or produce evidence, the award may be made on the evidence before the tribunal.
• Experts and evidence: the tribunal may appoint experts (Section 26); the tribunal, or a party with its approval, may seek court assistance in taking evidence (Section 27).

Time limit (Section 29A)

Delay was the biggest complaint against Indian arbitration. Section 29A (inserted 2015, revised 2019):

• Arbitrations other than international commercial ones: award within 12 months from completion of pleadings.
• International commercial arbitrations: as expeditiously as possible, with an endeavour to dispose of the matter within 12 months.
• Parties may by consent extend by 6 months; beyond that only the court can extend, for sufficient cause, and may reduce the arbitrators' fees if the delay was attributable to the tribunal.
• Without extension the mandate terminates, though the court may substitute arbitrators and continue the proceedings.

The Arbitral Award

The arbitral award is the tribunal's final decision on the dispute. The Act also recognises interim awards (finally deciding some issues early) and an award on agreed terms (where the parties settle).

• Applicable law (Section 28): where the seat is in India, a domestic arbitration applies the substantive law of India; an international commercial arbitration applies the rules of law chosen by the parties, or failing that, those the tribunal considers appropriate. In every case the tribunal takes into account the terms of the contract and trade usages.
• Settlement (Section 30): with the parties' agreement, the tribunal may use mediation, conciliation or other procedures to encourage settlement. On settlement it terminates the proceedings and, if requested, records an award on agreed terms, which has the same status and effect as any other award.
• Form (Section 31): in writing and signed; in a multi-member tribunal, majority signatures suffice if the reason for any omitted signature is stated. Reasons are required unless the parties agreed otherwise or it is an award on agreed terms. It states its date and the place of arbitration (where it is deemed made), and a signed copy goes to each party. The tribunal may award interest; unless the award directs otherwise, the sum carries post-award interest at 2% above the current rate on the date of the award.
• Costs (Section 31A): decided by the tribunal; the unsuccessful party generally pays, though the tribunal may depart from this for recorded reasons.
• Termination (Section 32): by the final award, or by order when the claimant withdraws, the parties agree to end the proceedings, or continuation becomes unnecessary or impossible.
• Correction and interpretation (Section 33): within 30 days of receiving the award, a party may ask for correction of computation, clerical or typographical errors; interpretation of a specific point (if the parties agree); or an additional award on claims presented but omitted. The tribunal may also correct errors on its own.

Recourse Against an Award: Section 34

▶ Watch this part of the lecture (2:36:14)

The only recourse against an award in a court is an application to set it aside. It is not an appeal.

Appeal	Setting aside
Higher court re-examines facts and law and may substitute its own decision	Court only checks for one of the few serious defects listed in the Act; no re-appreciation of evidence, no correction of mere errors of fact or law

Grounds

(a) To be established by the applicant, on the basis of the arbitral record:

1. a party was under some incapacity;
2. the arbitration agreement is invalid under the law the parties chose or, failing that, Indian law;
3. no proper notice of the appointment of an arbitrator or of the proceedings, or the applicant was otherwise unable to present its case;
4. the award decides a dispute outside the submission or beyond its scope (if separable, only that part is set aside);
5. the composition of the tribunal or the procedure was not per the parties' agreement, unless that agreement conflicted with a mandatory provision of Part One.

(b) Found by the court itself: the subject matter is not arbitrable, or the award conflicts with the public policy of India.

Public policy

The 2015 amendment, on the Law Commission's recommendation, narrowed the ground:

• Explanation 1: an award conflicts with public policy only if (i) its making was affected by fraud or corruption or it violates Section 75 or 81 (conciliation chapter); (ii) it contravenes the fundamental policy of Indian law; or (iii) it conflicts with the most basic notions of morality or justice.
• Explanation 2: testing for fundamental policy of Indian law does not involve a review on the merits.
• Section 34(2A): a domestic award (not an international commercial award) may be set aside for patent illegality appearing on the face of the award, but not merely for a wrong application of law or by re-appreciating evidence.
• Section 28 amended: the tribunal must take into account the contract terms, instead of deciding strictly in accordance with them.

Point	Saw Pipes (2003)	After 2015 and Ssangyong (2019)
Public policy	Wide, including interest of India	Narrow (Explanation 1)
Patent illegality	Part of public policy	Section 34(2A); domestic awards only; on the face of the award
Merits review	Close to an appeal	Excluded

Time limit and procedure

Apply within 3 months from receipt of the award (or disposal of a Section 33 request). The court may allow a further 30 days for sufficient cause, but not one day more. Prior notice must be given to the other party, and the court should decide expeditiously, and in any event within one year of service of the notice.

Power to modify an award

A gentler remedy: under Section 34(4), on a party's request, the court may adjourn the proceedings to let the tribunal remove the defect in its award.

Finality and Enforcement of the Award

▶ Watch this part of the lecture (2:44:34)

An award is final and binding on the parties and persons claiming under them (Section 35), and is enforced under the CPC as if it were a decree (Section 36), once the time for a Section 34 application has expired and even while one is pending.

Period	Stay of award during a Section 34 challenge
Before 2015	Filing the application automatically stayed the award; winners waited years.
2015 amendment	No automatic stay. The losing party must apply separately; the court may grant a stay on conditions, for written reasons, with due regard to CPC rules on staying money decrees for a money award.
2021 amendment	If a prima facie case of fraud or corruption (in the arbitration agreement, the contract or the making of the award) is shown, the court must stay the award unconditionally pending the challenge.

Appeals (Section 37)

Arbitration law deliberately limits appeals: Section 37 lists the only appealable orders. The appeal lies to the court that hears appeals from original decrees of the court that passed the order.

• Court orders: refusing to refer parties to arbitration (Section 8); granting or refusing an interim measure (Section 9); setting aside or refusing to set aside an award (Section 34).
• Tribunal orders: accepting a plea that the tribunal lacks jurisdiction or exceeds its authority; granting or refusing an interim measure (Section 17).

No second appeal lies from an order passed in appeal, though the right to approach the Supreme Court remains.

Foreign Awards and the New York Convention

A foreign company that wins an arbitration must be able to enforce the award where the loser has assets. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958) gives this guarantee; more than 170 countries are parties. India signed on 10 June 1958 and ratified in 1960, with two reservations: it applies the Convention only to awards made in another Contracting State, and only to disputes from relationships considered commercial under Indian law.

Foreign award (Section 44)

• arises from legal relationships, contractual or not, considered commercial under Indian law;
• made on or after 11 October 1960;
• under a written agreement to which the Convention applies;
• made in a territory notified by the Central Government as reciprocating. An award from an un-notified Convention country cannot be enforced under these provisions.

Recognition, enforcement and refusal

Recognition (Section 46) treats the award as binding between the parties, e.g. as a defence or set-off; enforcement gives effect to it by execution. Under Section 47, the applicant produces the award and agreement (original or certified) and evidence that it is a foreign award.

Section 48: the party resisting enforcement must prove that:

1. a party was under incapacity, or the agreement was invalid;
2. it lacked proper notice or could not present its case;
3. the award goes beyond the submission;
4. the composition or procedure did not follow the agreement or the law of the seat;
5. the award is not yet binding, or has been set aside or suspended by a competent authority of the country where it was made.

The court may also refuse on its own if the subject matter is not arbitrable under Indian law or enforcement is contrary to public policy of India, which after 2015 has the same narrow meaning as under Section 34, with no merits review. Once satisfied, the court treats the award as a deemed decree (Section 49). An appeal lies under Section 50 only against an order refusing reference under Section 45 or refusing enforcement.

Amendments to the Arbitration and Conciliation Act

Amendment	Main changes
2015 (246th Law Commission Report; in force 23 October 2015; the biggest reform)	Time limits; fast-track procedure; Fifth and Seventh Schedules; enforceable tribunal orders; narrower public policy with patent illegality; end of automatic stay; court at appointment confined to existence of the agreement; interim relief by Indian courts in foreign-seated arbitrations.
2019 (high-level committee chaired by Justice B. N. Srikrishna; aim: promote institutional arbitration)	12-month limit from completion of pleadings; pleadings within 6 months; tribunal interim measures limited to the arbitral proceedings; Section 42A (confidentiality) and Section 42B (immunity of arbitrators acting in good faith); a new Part creating the Arbitration Council of India to grade institutions and accredit arbitrators.
2021	Unconditional stay for awards tainted by fraud or corruption; omitted the Eighth Schedule on arbitrator qualifications (added in 2019 but never brought into force).
October 2024 draft Bill	Released for public consultation; proposes statutory recognition of emergency arbitrators and an appellate arbitral tribunal. Still a draft; no amendment enacted since 2021.

Much of the 2019 amendment is unimplemented: institutional appointment under Section 11 was never brought into force, so Section 11 works in its 2015 form; the Part on the Arbitration Council was brought into force only in October 2023, and the Council has still not been constituted; and the new Section 87, which tried to keep the 2015 changes (including the end of the automatic stay) away from older arbitrations, was struck down by the Supreme Court as manifestly arbitrary.

Drafting an Arbitration Clause

A defective clause invites years of litigation about whether there is an arbitration at all. A sound clause covers ten elements:

1. Scope in broad words ("all disputes arising out of or in connection with this contract");
2. number of arbitrators, never even;
3. a fair appointment method, not letting one party alone appoint a sole arbitrator;
4. the seat, stated clearly as the seat and not merely as the venue;
5. the venue, if hearings may be held elsewhere for convenience;
6. governing law of the contract and, if needed, of the arbitration agreement;
7. the institution and its rules, for institutional arbitration;
8. language;
9. confidentiality, if more than the Act provides is wanted;
10. the fast-track procedure, if speed is wanted.

Online Dispute Resolution (Unit 6)

▶ Watch this part of the lecture (2:55:18)

Meaning of ODR

ODR is not a new kind of process in the legal sense. Negotiation, mediation, conciliation and arbitration remain what they are; only the medium changes: parties meet through video, chat, e-mail or an online platform instead of a room.

Relationship between ADR and ODR

ODR is ADR moved online and strengthened by technology, so the same legal rules apply. An online arbitration must still rest on a written arbitration agreement, treat the parties equally and produce an award that can be challenged under Section 34. An online mediation must still be voluntary and confidential.

Why ODR is needed

Millions of such small disputes arise every year from online shopping, digital payments and food delivery; without ODR, most would never be resolved. ODR:

• reduces cost: nobody has to travel;
• saves time: communication can happen at any hour;
• overcomes distance between cities and countries, reaching remote areas with internet access;
• handles huge volumes of similar disputes.

Techniques of ODR

Three broad groups, mirroring the ADR processes:

1. Consensual or negotiation-based ODR: parties settle directly through a platform that gives a structured way to raise a complaint and exchange offers. An advanced form is automated negotiation, such as blind bidding for money claims: each party secretly submits offers the other cannot see; if the claimant's demand and the respondent's offer in a round fall within a pre-agreed range, the software settles the case automatically, often at the midpoint; if not, the round fails and no figure is revealed.
2. Assisted negotiation and online mediation: a human mediator or conciliator helps the parties through video, chat or a platform, holding joint and private sessions online. Some platforms also use software to help parties identify interests and suggest solutions.
3. Adjudicative ODR: (a) online arbitration, where pleadings are filed electronically, hearings are held by video, and the award is signed and delivered electronically; (b) internal complaint systems of large online marketplaces and payment platforms, deciding buyer–seller disputes under their own policies.

Technology as the "fourth party"

Traditional ADR has two parties and a neutral third party. Ethan Katsh and Janet Rifkin called technology in ODR the fourth party: not merely a pipe carrying messages, but an active shaper of the process. It organises information, reminds parties of deadlines, suggests options and, in automated negotiation, even closes the deal. Sometimes it assists the human neutral; sometimes, as in blind bidding, it replaces the neutral completely. Artificial intelligence is making it more powerful, raising serious questions of fairness, transparency and accountability.

Synchronous and asynchronous ODR

Point	Synchronous	Asynchronous
Meaning	In real time	Not in real time; each party responds at its own convenience
Means	Video conference, live chat	E-mail, messages, platform postings
Merits	Feels like a real meeting; builds rapport	Suits different time zones or poor connectivity; gives time to think
Drawbacks	Needs everyone online together and a good connection	Slower; weaker human connection

Legal and Policy Framework of ODR in India

1. Statutes: building blocks, no single ODR law

• Information Technology Act, 2000: recognises electronic records and electronic signatures, so writing or signature requirements can usually be met electronically.
• Section 7, Arbitration and Conciliation Act: since 2015, an arbitration agreement may be contained in communication through electronic means that provides a record of the agreement. Even earlier, the Supreme Court had held that a contract and its arbitration clause can be concluded by an exchange of e-mails, without a signed formal document.
• Section 30, Mediation Act, 2023: online mediation, including online pre-litigation mediation, with the written consent of the parties, through video or audio conferencing, encrypted e-mail, secure chat and similar means, ensuring integrity and confidentiality. Most of the Act, including Section 30, is not yet in force; it is an enacted provision awaiting operation.
• Consumer Protection Act, 2019: complaints may be filed electronically and heard through video conferencing.
• Consumer Protection (E-Commerce) Rules, 2020 (under that Act): e-commerce entities must appoint a grievance officer, who must acknowledge a complaint within 48 hours and redress it within one month.

2. Regulators: binding sectoral schemes

• RBI (August 2020): authorised payment system operators must provide an ODR system for digital payment disputes, starting with failed transactions.
• SEBI (July 2023): a circular, operative in phases from August 2023, created the Smart ODR portal for securities market disputes, run by the stock exchanges and depositories. The investor first complains to the market participant; if that fails, the investor goes to the portal, usually after trying SEBI SCORES. There the dispute goes first to online conciliation, then if necessary to online arbitration under the Arbitration and Conciliation Act.

These circulars bind the regulated entities.

3. Courts: judicial decisions and institutional practice

• 2003: the Supreme Court held that a witness in a criminal trial may be examined through video conferencing, because presence in law includes virtual presence.
• During the pandemic, courts moved online; in July 2020, Chhattisgarh held what was reported as the first online Lok Adalat.
• Consumer complaints can be filed online, first through e-Daakhil and now e-Jagriti.

These are judicial decisions and institutional practices, not statutory rules.

4. Policy: the NITI Aayog expert committee

Set up by NITI Aayog in 2020 and chaired by Justice A. K. Sikri, a former Supreme Court judge, the committee released its final report, Designing the Future of Dispute Resolution: The ODR Policy Plan for India, in November 2021. Its phased plan:

1. build digital access and train neutrals;
2. bring government departments and public sector bodies onto ODR for their own disputes, and mainstream ODR through legal changes;
3. make ODR a primary mode of dispute resolution, with a national ODR platform.

It preferred light-touch regulation (voluntary principles for platforms, not heavy licensing) and suggested mandatory pre-litigation mediation, on a pilot basis, for some classes of disputes, with a right to opt out.

Special Concerns in ODR

• Confidentiality and data security: online communications can be recorded, copied or hacked, so platforms must protect confidentiality by encryption and secure storage. The Digital Personal Data Protection Act, 2023 and its Rules of November 2025 will regulate how platforms handle personal data, but these duties are being phased in and the main obligations are not yet in force.
• Authentication: to confirm the person on screen is really the party, platforms use one-time passwords, identity documents and electronic signatures recognised by the Information Technology Act, 2000.
• Consent: a party must genuinely agree to ODR. Where a seller buries an arbitration clause in long terms that a consumer clicks without reading, real consent is doubtful.
• Accessibility and the digital divide: not everyone has a smartphone, stable internet or platform skills. Elderly persons, people in remote villages and persons with disabilities may be excluded; language barriers add to this. ODR serving only the urban and educated would deepen inequality.
• Due process: can a witness be properly examined by video, or is someone coaching him off-camera? Online processes must still guarantee equal treatment and a full opportunity to present one's case.
• Enforcement: an online settlement or award is enforceable only if it meets the ordinary legal requirements: a mediated settlement must satisfy the law under which the mediation took place, and an award must comply with the Arbitration and Conciliation Act. Cross-border outcomes face the old problem of enforcement in another country.

Barriers and Future of ODR in India

Barriers: limited awareness, low trust in online processes, the digital divide, privacy concerns, no single legal framework, a shortage of trained online neutrals, and the habit of thinking only of courts.

Potential: enormous, given India's large digital user base, vast number of low-value disputes and heavily burdened courts.

Course Summary and Exam Guidance

▶ Watch this part of the lecture (3:07:29)

Course recap

• ADR starts from the nature of a dispute and the limits of litigation.
• Negotiation is the foundation of every process: interests, options, objective criteria, and the three alternatives, BATNA, WATNA and MLATNA.
• Mediation adds a neutral helper: the mediator's skills and ethics, the Mediation Act, pre-institution mediation and consumer mediation.
• Arbitration: the arbitration agreement, the seat, the tribunal, the award, Section 34 and enforcement.
• Bhatia International was overruled, Saw Pipes narrowed and Chloro Controls reshaped.
• Technology is carrying these processes online through ODR.

Exam guidance

Three habits for examinations and practice:

1. In every problem, first identify the right process for the dispute, and explain why.
2. On arbitration or mediation, state the current law and whether the provision is in force; when citing an older case, say what later happened to it.
3. When two concepts look alike, such as mediation and conciliation, seat and venue, or setting aside and appeal, explain the difference clearly with an example.

Quick revision

• ODR = resolving disputes wholly or partly with digital technology, outside the courtroom; only the medium changes, the ADR rules still apply.
• A court hearing by video conferencing is online litigation, not ODR in the strict sense.
• Three techniques: negotiation-based (including blind bidding), assisted negotiation and online mediation, and adjudicative ODR (online arbitration, platform complaint systems).
• Platform complaint decisions are private and non-binding unless part of a valid arbitration agreement or statutory scheme.
• Katsh and Rifkin: technology is the "fourth party".
• Synchronous = real time; asynchronous = each party responds at its own convenience.
• Building blocks: IT Act, 2000; Section 7 of the Arbitration and Conciliation Act (electronic communication, since 2015); Section 30 of the Mediation Act, 2023 (online mediation, not yet in force); Consumer Protection Act, 2019; E-Commerce Rules, 2020 (48 hours / one month).
• Sectoral schemes: RBI (August 2020, digital payments); SEBI Smart ODR portal (July 2023: conciliation, then arbitration).
• Courts: 2003 Supreme Court ruling on video-conference witness examination; first online Lok Adalat in Chhattisgarh (July 2020); e-Daakhil, now e-Jagriti.
• NITI Aayog committee (Justice A. K. Sikri), report of November 2021: recommendations, not law.
• Special concerns: confidentiality, authentication, consent, digital divide, due process, enforcement.