The Conception of Out of Court Settlement

Introduction:

“A conflict or controversy, especially one that has given rise to a particular lawsuit.”

Black’s law Dictionary

Anyone and everyone knows how the works of winding a dispute between two parties work, be it between friends in a room or a dispute between two parties in a courtroom. There are laws for every procedure. But what happens when the dispute needed to be settled amicably between the parties which can also be called an outside court settlement. Then it may take place through arbitration, mediation, or conciliation. ADR techniques can be used in all those cases, which are capable of being resolved, under law, by mutual agreement between the parties. The scope of ADR/outside court settlements is wider and can cover civil nature, in commercial or industrial, and even the family disputes or any other cases of urgent nature. This route takes patience and tolerance, which can be done by a person who knows and understands the laws, so it doesn’t violate. In this article, we will deal with and understand how an informal dispute can be resolved and how can an advocate contribute to such a situation. We will also learn about the disputes which can be taken into consideration and can be mediated.

Defining the Conception of Out of Court Settlement 

Dispute resolution can be divided into two types:

Judicial Dispute Resolution

Judicial Dispute Resolution or JDR is a pre-trial settlement process involving judges as settlement facilitators. It necessitates a judge appointed/selected by the Court(with appropriate jurisdiction) to determine the outcome based on the laws and legal precedents. It focuses more on the facts of a dispute. It aims to determine the legal rights of the parties. It is always a formalized and well-structured process. Mandatory participation once legal action is initiated. 

Alternate Dispute Resolution

ADR  provides alternative ways of encouraging citizens to fix legal disputes before going to court. There is the presence of an impartial third party, considered a “neutral” person, who is attempting to either settle or narrow the conflict areas in the ADR. Alternate Dispute Settlement refers to the broad range of mechanisms by which controversies and disagreements are settled rather than by lawsuits.

Our law today also acknowledges that the right to go to the Court and to rely on the strict request is surrendered where there are arbitral arrangements. Arbitrators are not judges, and arbitration should not be a jury. They should not apply the law similarly and strictly that a judge does that goes for procedures and the related rules of evidence. They must never miss a single sight of the principle that their overriding obligation which is to provide access to each and everyone who is aggrieved, to act impartially, and most of all, to do justice. 

Societies in Africa, Asia, and then in the East were practicing non-litigious means by using dispute resolution long before the nation-state’s advent, for the building of long-term relationships was the bedrock on which those societies rested. 

Mahatma Gandhi – He realized that the true function of a lawyer was to unite the parties. During the 20 years of his legal practice as an attorney, a large part of his time was occupied with bringing the private compromises of nearly hundreds of cases. He lost nothing thereby – not the money, certainly not his soul.

History of ADR in India 

In settling conflicts involving family, social classes, and mere disputes over trade and commodities, the old dispute settlement scheme made a substantial contribution. The structures at the village level played the leading role as disputes were mediated by elderly people like the Council of Village, a form of informal mediation which was also known as Panchayats.

People did not live settled and were nomads at the beginning of the Vedic period, but with agriculture creation, people began to settle into communities. In India during those days, the traditional form of government was monarchy. The primary occupation was agriculture and commerce flourished alongside it.

The creation of autonomous states with fluid territorial borders, around which conflicts also occurred, was motivated by the rise in population and surplus production.

In ancient times, disagreements had been settled peacefully with the participation of kulas (family or clan assemblies), srenis, parishads before the King arrived to adjudicate disputes (assemblies of learned men who understood the law).

In the village courts themselves, Mughal rulers even settled their lawsuits. They demanded the arbitration of an unbiased arbitrator (salis) by the caste courts or panchayats.

The Maratha Empire: the parties to the conflict had a deal to settle with respect to accordance with the Panchayat laws and regulations. The Panchayat was then called upon to investigate the case and make his decision neutral or without party discrimination. ADR has gathered pace in India with the introduction of the British Raj. Invite arbitration.- The Bengal Regulations shall present the case to an arbitrator whose decision shall be binding upon all the parties, named after mutual consent.

The Act VIII of 1857 was the procedure for civil courts- included arbitration without any kind of intervention of the Court. The Indian Arbitration Act, 1899- applicable to Presidency – towns of Calcutta, Bombay, and Madras- suffered many defects. The Arbitration act of 1940 replaced the Indian Arbitration act, 1899 and remained until 1996.

Offenses that can be Squared through ADR or Out of Court 

Under the Code of Civil Procedure section 89 gives this opportunity to the public, whenever it appears that the Courts are elements of functional settlement outside the Court. Then the Court would formulate the terms of the proposed settlement and cite the same to negotiation, conciliation, consultation, or Lok Adalat. Acts that are associated with alternative dispute resolution 

1. The Arbitration and Conciliation Act, 1996
2. The Legal Services Authority Act, 1987

• In Gian Singh vs State Of Punjab & Anr[1] the Court observed that offenses arising from commercial, financial, mercantile, civil, partnership, relating to matrimony or dowry could be opted for out of court settlement.
• In M/S. Afcons Infra. Ltd. & Anr vs M/S Cherian Varkey Construction Co. (P) Ltd.[2] the Apex Court held that the said categories of cases could be settled via the ADR process. All offenses which are referred to as compoundable as per the Code of Criminal Procedure 1973.

All cases relating to Business, trade, commerce, and contracts, including:

1. The disagreements arising out of provisions of contracts (including all money claims);
2. The disputes relating to the performance of specific acts;
3. The clashes occur between customers and supplier of goods;
4. The disputes which arise between the bank and its account holders
5. The disputes relating to real estate cases.
6. The disputes that are between landlords and tenants
7. The disputes which are relating to providing insurance

All cases arising from soured relationships, including:

1. The disputes arise from marriages, maintenance, custody of children. 
2. The disputes as to the partition of property among the family, coparceners etc.
3. The disputes occurring among partners relating to partnership
4. Cases where there is a need for a resolution without altering the previous relation.
5. Disputes between neighbors (relating to parking, nuisance, noise complaint etc.)
6. The clashes between employers and employees
7. Disputes among people living together in societies.
8. All disputes relating to tort and its liability, including the claims for accidents or negligence.

The Indian Court does not consider a divorce settlement outside the Court. Mediation is a way to resolve the conflict. Still, if a couple wishes to call off their union without letting the Court know their intention, it is not an intelligent way to divorce. If you are lawfully married, you will apply for and make use of a divorce order dissolving your union. Out of Court, divorce is not recognized by the courts of our country.

According to Order 23, Rule 1 of the CPC, if an action for an out-of-court resolution is dismissed, the litigants are disqualified from the commencement of fresh proceedings on the matter withdrawn.

Reading Section 12A of the Commercial Courts Act and PIMS Rules, 2018

1. An out-of-court settlement is a mechanism in which two or more persons seek to authorize an unbiased representative or tribunal to make a non-binding determination about how to settle the conflict. This is also known as ADR. Alternative dispute settlement involves a dispute resolution mechanism and a technique that serves as a medium for the non-conforming sides to enter into a dispute arrangement, which is a collective term for the forms in which the parties will address the dispute with the support of third parties. The Indian Parliament passed the Alternate Dispute Resolution Act, 1996. 
2. Many acts that provide for an ADR provision like section 4(1) Industrial Disputes Act 1947 provide for mediation settlement of industrial disputes. The other form of mediation is mediation by court order. Salem Bar Association v Union of India, a committee was formed to draft the Civil Alternative Dispute Resolution Rules, 2003 with reference to which several High Courts framed rules for court-annexed mediation. 
3. Section 12 A of the Commercial Courts Act requires that pre-institutional mediation remedies must be exhausted before a complainant brings a claim and does not allow for immediate temporary relief. Such pre-institutional mediation must be performed by the authority established under the Legal Services Authorities Act, 1987. This pre-institutional mediation procedure would have to comply with the laws notified by the Central Government. The Ministry of Law and Justice, by the Rules of the Commercial Courts (Pre-institution Mediation and Settlement) Rules, 2018pursuant to Section 21A, read with Section 12A of the Act, has issued a time limit of 3 months from the date of registration of the complaint by the complainant according to Section 12A(3) of the Act for the conclusion of proceedings about pre-institution mediation.
4. Section 12 A of The Commercial Courts Act, 2015 makes pre-institutional consultation obligatory for the parties before bringing an action unless an “immediate” temporary remedy is preferred. Pre-institutional mediation was introduced by India to boost its ease at business performance and improve the country’s economy as a whole. This scheme is based on the “opt-out” strategy implemented by several countries where the litigants cannot approach the courts until they show that they attended the original consultation session.
5. In 2018, Commercial Courts (Pre-Institution Mediation and Settlement) Rules were also passed by the central government to help out the commercial courts from numerous cases which care capable of settlement outside the Court.  

The present scenario to understand the types of ADR

Arbitration

Where two or more persons agree that a dispute or a potential dispute between them shall be decided in a legally binding way by one or more impartial persons in a judicial manner, that is upon evidence put up before them. The agreement is called an arbitration agreement or a submission to arbitration.

Conciliation

Conciliation is a non-binding procedure in which an impartial and neutral third party assists the disputing parties to reach a mutually satisfactory and agreed settlement of the dispute. The conciliation means to console for settlement of the conflict by mutual agreements. The settlement means ‘right settlement’ on a give and take basis. 

Mediation

Mediation and conciliation may be inter-changeable expressions in both procedures. A successful completion of the procedure results in a mutually agreed and acceptable settlement of the dispute between the parties. Mediation is a process in which a neutral person intervening has to assist negotiating parties in reaching mutually acceptable terms of the settlement. The purpose of mediation is to bring the dispute to an end through mutual resolution as early as possible. The mediator does not give any judgment. Mediation is confidential and does not bind parties. They can approach the Court if mediation fails. 

Negotiation

Negotiation takes place when parties resolve their dispute through dialogue and without a neutral third party. The parties may choose to be represented by their attorneys during negotiations. Like conciliation and mediation, negotiation is also a non-binding procedure but a suitable formula for dispute resolution.

Med-Arb 

Med-arb is a method of alternative dispute resolution that combines both mediation and arbitration. Mediation is attempted at first, and if mediation fails, the dispute is referred to arbitration. The parties use one neutral person as both Mediator and Arbitrator. The ‘Med-arb’ is a binding decision including agreements achieved during the mediation phase, and the arbitration decision and the decision is enforceable as an ordinary arbitration award

Mini-Trial

A mini-trial is not so much of a trial, as it is a settlement process. Each party to the dispute presents their highly summarized cases. It is to avoid lengthy and expensive litigation between corporate parties. The mini-trial takes one day or less in dispute resolution. If they fail to negotiate the process turns into mediation with a neutral adviser helping them

Neutral Evaluation

Neutral evaluation means each side submits its case to a neutral party who opines on the merits and limitations of the evidences and claims of each party and how the conflict is decided. It is successful because a professional in the area needs to be interested in the conflict. The view of the evaluator is also used for arbitration agreements.

Settlement Conferences

A settlement conference is an ADR in which a meeting is held by the parties to settle the issues before a trial. A settlement conference is held by the trial judge and takes place in the judge’s chambers or a conference room at Court. Settlement Conferences may be voluntary or mandatory, depending on the judge.

Community Dispute Resolution Program

These Conflict Resolution Centres have specialized community volunteers who provide low-cost mediation as an alternative to lengthy civil proceedings. This form is designed to deal with a wide variety of disputes between private and public sectors, such as owners, termination of company, land use, public education, and adult environmental programs. The courts refer to most of the cases.

Lawyers as the Arbitrator

1. The legal profession was originally cynical about the extension of the ADR, which was partially a reaction to criticism of the existing adversarial legal conflict structure, particularly criticism of lawyers’ powerful and governing position. However, some attorneys soon implemented mediation within the framework of their legal services. Law specialist bodies vigorously encourage the benefits of consulting a lawyer with the expertise of a mediator. In Court, the mediator appointed would invariably be a legal professional. Lawyers’ professional insurance plans now deem mediation to be a ‘legal service’ and lawyers working as mediators are protected from damages of this job. 
2. Comparing the normal practice of lobbying with mediation practice, there is a fundamental variance between a rights-based approach and an interest-based approach. ‘Interest-based systems are concerned with identifying options that suit the desires and expectations of the parties involved. The rights-oriented mechanisms are concerned with the assessment of consequences based on rights, rules and law.” 
3. Professional standards for lawyers and mediators are designed to help an individual practitioner resolve and avoid ethical dilemmas. However, these do not address all ethical issues, and they sometimes contain competing or conflicting provisions and values. Additionally, the mediators’ standards can clash with lawyers’ codes of conduct. When lawyers act as mediators, the lawyer’s duty that is most challenged is their duty to the Court.[3]

Conclusion

The term ‘alternative’ refers to a process that is an alternative to the traditional system for settling conflicts outside the court. Mediation is one of the ADR forms. Mediation is negotiated with the help of a third-party impartial party. It’s the easiest way to settle conflicts, as it saves money, time, and partnerships from spoiling forever. It helps not only customers but also supporters. Advocates are not at all expected to think badly about this system. If a lawyer supports his client during the process of consultation and arbitration process, that can happen. It will give him good exposure, which is important to his career. It will provide more time for other difficult situations.

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References:

[1] (2012) 10 SCC 303

[2] 2010 (8) SCC 24

[3] Sehgal, D., 2021. Doctrine of separability with context to an arbitration clause or an agreement – iPleaders. [online] iPleaders. Available at: <https://blog.ipleaders.in/doctrine-separability-context-arbitration-clause-agreement/> [Accessed 14 February 2021].