With around 30 million cases clogged across courts in India and delays accounting for an economic loss of 0.5 per cent of the Gross Domestic Product (GDP) (State of Judiciary, Daksh India), the timely delivery of justice has become a major worry for the government of India.
With an attempt to fix the issue of pendency and delays, the Niti Ayog has come out with a three-year plan stressing on improving judicial performance. Such attempts to reform the judiciary are not new. In 2004, the Government of India had formulated the National Litigation Policy in 2004, including strategies such as the National Mission for Justice Delivery and Judicial Reforms, e-court and case management systems.
In the recent 2017–18 central Budget, the government increased its spending by earmarking Rs 1744 crore to build judicial infrastructure for improving existing courts and enabling digitisation. However, such attempts have been more piecemeal and though might produce results in the short run will not substantially affect the court’s case load.
It is therefore important for both the courts and the government to revisit their approach and set their priorities to tackle the increasing rate of pendency and de-clog the judicial system. Essentially, the government needs to take up definite steps to develop mediation and arbitration as an appropriate system moving out of the existing litigation prone and court-centric dispute resolution in order to reduce pendency in the long run.
Rule of Litigation– A Case of Commercial Disputes
Globally, countries have realised the need for an effective dispute resolution mechanism that will focus less on litigation and more on peaceful conflict resolution. Many jurisdictions such as Oregon in the United States (US) and Victoria in Australia have formalised mediation and conciliation as Appropriate Dispute Resolution (ADR) than an alternative to court-based dispute resolution system.
The reality of ADR system in India, however, is different as discerned in a recent assessment study, conducted by the Centre for Public Policy Research (CPPR), on Commercial Dispute Resolution (CDR) in India. The study found that companies and entrepreneurs continue to prefer litigation to ADR. Interestingly, negotiation (50 per cent) and a mix of mediation and arbitration (20 per cent) were the preferred choices of dispute resolution for the parties. However, weak judicial backing for mediation and lack of compliance by parties impedes ADR processes. In 30 per cent of the cases, the opposite parties did not appear or failed to respond to the call for dispute resolution, in spite of a prior agreement to choose arbitration or mediation.
The latest amendment to the Arbitration and Conciliation Act, 1996, was aimed to streamline some of these processes and strengthen ADR in the country. It has attempted to restrict unnecessary challenges against arbitration in the court citing ‘public policy’ [Section 34(2)(b)], which has been a strong tool used by the parties to delay or thwart the dispute resolution process. This included setting a time limit of one year and limiting challenges citing patent illegality or erroneous application of law. However, in the absence of a proper framework, it is left to the discretion of the judges to allow such matters and in majority of the cases the ‘wheel of litigation’ rolls on.
The study finds that in six out of ten cases, on average, parties filed a case before the court after trying arbitration or mediation. Half of the parties mentioned unfavourable outcome as their reason for challenging the arbitration/mediation in court. This tendency needs to be discouraged through legislative measures and judicial pronouncements to enable better compliance and utilisation of ADR systems in India.
Moving out of litigation
It is important for Indian courts to develop an internal system to reduce arrears and discourage litigation. Though guidelines need to be set up for prioritising disputes, a universal guideline for judges will not serve the purpose. Rather, it should be a combination of judicial propriety in hearing matters, an efficient case management system and respect for settlement agreement.
In India, there is hardly an instance where the judges dispose matters based on a reasoning that the parties had agreed for a settlement or reached a settlement agreement. In fact, the courts’ respectful approach towards settlement agreements assisted the growth of mediation in the United Kingdom (UK). In the case of Susan Dunnett v. Rail Track PLC  1 WLR 2434]; Lord Justice Brooke, Lord Justice Robert Walker and Lord Justice Sedley delivered a landmark judgment by refusing to award costs to the successful party, who unreasonably refused to mediate. The court invoked Rule 1.4 of the UK Civil Procedure Rules 1998, “…encouraging the parties to use an alternative dispute resolution procedure, if the court considers that appropriate and facilitating the use of such procedure.”
This was backed by ‘The Practice Direction for Pre-action Conduct and Protocols in Litigation’ developed by the Ministry of Justice in the UK, which suggested the need for resorting to ADR (Part 8 of Civil Procedure Rules). This allows the judges to investigate why the parties did not utilise mediation or whether one of the parties had unreasonably denied the invitation to mediate. Such rules have strengthened the adoption of alternate systems in civil matters, especially in family and property disputes.
Initiatives in India like pre-trial conferences and pre-trial discovery of cases mooted by the Law Commission of India (245th Report) assume importance as a tool to reduce unwanted litigation. This involves the judges sitting with the parties before a trial to explore options for reaching a settlement, reducing unwanted delays, giving a proper structure for dispute administration and deciding on the course of the proceedings.
In such instances, the judges can limit the need for an elaborate trial or refer the case to mediation or conciliation. The Department of Industrial Policy and Promotion (DIPP) had proposed providing financial incentives for referral to mediation and conciliation in line with global practices.
In other countries provisions allowing priority to ADR have enabled parties to move out of litigation. The “Order to Mediate” in Houston and Dallas allow judges to refer litigating matters for mediation. Currently, less than five per cent of civil lawsuits related to personal injury go to trial (US Department of Justice), with the remaining 95 per cent settled or decided before trial. In the UK, the parties can get a “Tomlin Order” passed to enforce settlement agreements reached between them.
The Japanese law suggests that disputes regarding land/house rent, marriage, adoption etc shall be first mediated (Linklaters World View of Commercial Mediation, 2016). The Japanese courts could also send back parties to mediation, if they have not attempted it in the first instance.
To discourage excessive litigation measures like incentivising judicial officers and imposing penalty on litigating parties will give the initial push for appropriate dispute resolution systems. Such attempts will also save considerable cost for the government and release the pressure on judicial infrastructure. In the long run, a strong institutional backing for ADR is required which will attract more parties to adopt mediation and arbitration.
The state of Maharashtra has already taken the right steps by making it mandatory for disputes above Rs 5 crore to be referred to institutional arbitration. The courts will therefore need to devolve themselves from being the umbrella for all litigations and assist in the process of encouraging ADR in the country. The courts and the government including the Niti Ayog need to put this message across the litigating populace to effectuate its initiatives in reducing pendency and delays.
*Madhu S is the Director (Research & Projects) at Centre for Public Policy Research. Views expressed by the author is personal and does not represent that of CPPR
This article was first published in Swarajya Magazine: Declogging Courts: Divert All That Can Be Diverted For Arbitration And Mediation