Online (Alternate) Dispute Resolution

 

The Mediation Act, 2023 (Act no 32 of 2023) which received the President’s assent on 14th September 2023 and was published in the Gazette of India on 15^th September 2023 has given a new dimension to the Alternate dispute resolution mechanisms in India.

 

So let us first understand what Alternate Dispute Resolution (ADR) is. Disputes arise when one party raises an issue concerning another party, generally through legal channels. This means that one party initiates legal proceedings against the other party. Under the normal dispute resolution process, the matter is adjudicated by a court of law with an inherent right to appeal by the litigant who doesn’t accept the adjudication. The appellate process is also multi-layered with High Courts and the Supreme Court being Courts of Appeal. This long legal process delays the final resolution of the initial issue, with delays sometimes stretching to years and decades. As of the end of December 2022, a total of 5 crore legal cases were pending in Indian courts, out of which 4.30 crore cases were pending in lower district-level courts. Out of these, 1,69,000 cases were pending for more than 30 years in different District and High Courts. These are staggering numbers, resulting in India having the dubious distinction of the most pending court cases in the world.

 

So, when the traditional systems do not deliver justice promptly, an effort is made to evolve alternate mechanisms which can speed up the disposal of pending cases as well as prevent a further pile-up of cases at the initial stage itself. This has given impetus to alternate dispute resolution mechanisms mostly in the form of Online Dispute Resolution (ODR).

 

Online Dispute Resolution (ODR)

The above statistics of pending cases include a large number of small cases, e.g. at the end of 2019 about 35 lakh cases relating to dishonour of cheques were pending in courts. Most such cases can be resolved through out-of-court settlement. Similar is the case with many personal loan recovery cases for smaller amounts. Shortage of judges is the principal reason cited for large pendency of cases. Currently, there are about 10 judges for every million Indians, despite the Law Commission recommending 50 judges per million in 1987. In these last 35 years, the population has increased from about 816 million (1987) to 1.40 billion as of today. Thus, the lack of infrastructure, including manpower, has been a big hindrance in the expeditious disposal of ever-increasing litigation. In these circumstances, technology can replace human interface in some specified categories for faster disposal of cases.

 

The earliest legal recognition for an alternate mechanism was through Section 89(1) of The Code of Civil Procedure, 1908, whereby courts could recommend alternative dispute resolution methods including arbitration and mediation. However, this did not lead to any on-the-ground improvement. ODR is the latest step in the direction of expeditious dispensation of justice. It is a digital approach towards the resolution of disputes, mainly financial, expeditiously and with savings in costs.

 

Definition of ODR

ODR is a form of ADR that leverages technology to substitute physical interfaces between adversaries. The concept gained popularity when in August 2020, the Reserve Bank of India announced the “introduction of (an) Online Dispute Resolution (ODR) system for resolving customer disputes and grievances pertaining to digital payments, using a system-driven and rule-based mechanism with zero or minimal manual intervention”. RBI further highlighted the ODR mechanism as a technology-driven, rule-based, customer-friendly, and transparent dispute redressal system. This, in a nutshell, lays down the broad contours of ODR.

 

Although RBI has introduced ODR for digital payment disputes to start with, going forward the concept is expected to be used in resolving a variety of disputes, both in the personal and corporate arenas, especially with the growth of e-commerce. ODR primarily involves basic resolution techniques of negotiation, mediation or arbitration or a combination of all three, mixed with technology in a multi-disciplinary approach. This means that all steps in the process - initial dispute filing, the resolution process, and eventual settlement –are done online. This increases efficiency and saves time and cost. Resolution of disputes under ODR and brick-and-mortar process may be the same, but in ODR, with the assistance of technology, the arbitrator/mediator is able to bring the parties together through the virtual medium, facilitating effective communication and subsequent resolution.

Advantages of ODR

ODR quickens the dispute resolution process and makes it accessible. As the process is technology-enabled, the geographical location of the parties does not come in the way of faster dispute resolution. ODR puts the process on a partial auto mode, with the least human intervention. Automation of the process increases efficiency and cuts down on costs.

How ODR works

The primary focus of any ODR platform is to bring the disputing parties together on the platform. Thereafter the process is conducted in a series of structured steps involving the identification of issues and technology process formulation, identification of cost structure, process planning with stakeholders, and finally, building easy accessibility and transparency, inspiring confidence amongst stakeholders 

ODR can operate employing either of the three mechanisms - negotiation, arbitration, or mediation - or a mix of all the three.

 

Negotiation

Under this mechanism, both parties are brought together to resolve the dispute in a give-and-take manner.

Arbitration

In this process parties to the dispute agree for a third neutral party to resolve the dispute and deliver its decision which is binding on both parties. It is a quasi-judicial process used most often to resolve business disputes, as it is private and faster than the conventional litigation process. In India, Arbitration proceedings are regulated by the Arbitration & Conciliation Act,1996 (amended in 2019) while in the international arena, the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) is the guiding regulation. Although both regulations do not specifically provide for Online Arbitration, it is presumed that the online process has legal validity, once there is a contractual agreement to this effect between the parties concerned. In the online version, the basic arbitral process remains the same, the only difference being ease and cost-effectiveness induced by technological tools which may involve video conferences and paperless transactions instead of physical interaction.  

 

Mediation

This is possibly the oldest dispute resolution process as village panchayats have been the platform for mediation since times immemorial. The process has recently been given a legal framework through enactment of The Mediation Act, 2023 to formalize mediation as an alternate dispute resolution mechanism. Object clause of the Act states that it is “An Act to promote and facilitate mediation, especially institutional mediation, for resolution of disputes, commercial or otherwise, enforce mediated settlement agreements, provide for a body for registration of mediators, to encourage community mediation and to make online mediation as acceptable and cost-effective process and for matters connected therewith or incidental thereto”.

 

The Mediator should help the parties towards voluntary resolution by assisting them in identification and complete understanding of the problem and thereafter exploring potential agreements. The mediator can only facilitate a resolution. An unchallenged mediated settlement agreement can be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a judgement or decree passed by a court.

 

The Mediation Act also provides a list of disputes that are not suitable for mediation viz. disputes involving minors or people with intellectual disabilities, criminal prosecutions, tax-related issues, matters before regulatory bodies such as TRAI, and cases under the Competition Act, 2002.

 

Online Mediation

Section 30 of the Mediation Act provides for Online mediation including pre-litigation mediation. It may be conducted with the written consent of the parties including using electronic form or computer networks but not limited to an encrypted electronic mail service, secure chat rooms, and/or conferencing by video or audio mode or both. The conduct of online mediation shall ensure that essential elements of integrity of proceedings and confidentiality are always maintained. Further, Section 40 of the Act provides that mediation proceedings may be conducted by a Mediation Service Provider which includes a body or an organization, or an authority or a court annexed mediation centre, provided the Mediation Council of India recognize them. 

 

Difference between Mediation and Arbitration

When there was an Arbitration law in place, where was the need to enact a Mediation law? The answer lies in the fact that mediation is more flexible than arbitration. Mediation is preferred in smaller disputes of a non-corporate nature, where there are no legal issues involved which need the expertise of an Arbitrator. Due to this, mediation is a faster dispute resolution process and therefore less expensive. Mediation is also a preferred medium as it is not binding unlike arbitration, which binds the parties involved. But where large corporate matters are involved, Arbitration is still the preferred mode. A Mediator is a facilitator, while an Arbitrator is an Adjudicator.

Conclusion

With the rise of India as an economic and geopolitical power on the world stage, it is imperative to have an efficient legal system for faster dispensation of justice. But the huge backlog of cases in Indian courts can be a sure dampener for anybody looking to invest in the country. Well-laid-out Alternate dispute resolution mechanisms like Arbitration and Mediation inspire confidence in businesses, both domestic and international, for an expeditious resolution of commercial disputes. In this context, the latest legislative enactments shall go a long way in establishing the nascent concept of Online Dispute Resolution as an effective mechanism.