DOING BUSINESS IN INDIA – DISPUTE RESOLUTION

THE FRAMEWORK

India has a complex legal system and technicality-driven formal courts of law co-exist with litigant friendly tribunals and dispute redressal forums. There are civil and criminal courts to deal with civil and criminal matters. Special tribunals also exist to deal with specialised areas and enactment issues. Alternate Dispute Resolution (ADR) methods are also being used extensively and effectively.

JUDICIAL HIERARCHY – CIVIL COURTS

• The Supreme Court of India – the Highest Court in the country.
• The High Courts in the various States - the Highest Court in the respective State.
• District Courts, and Subordinate Courts.
• Special tribunals, like Competition Commission, Company Law Board, Income Tax Appellate Tribunals, three levels of Consumer Disputes Redressal Commissions, Debt Recovery Tribunals, Securities Appellate Tribunal, to name a few, also coexist with the regular courts to deal with specialised areas and enactment issues.

There is judicial supervision of the Supreme Court/High Courts on these Tribunals, by way of appeals or writ jurisdiction.

Delay in the Courts is a major concern, therefore, it is important to resort to Alternate Disputes Resolution systems.

Civil litigation has three cost components (i) court fee; (ii) miscellaneous expenses such as for serving the summons on the defendant, witnesses etc. and (iii) lawyer’s fee.

Court fee is payable for suits for recovery of money and other suits, appeals, and applications. Court fee will be payable on the amount sought to be recovered, value of property etc. as per the schedule of court fee applicable in each State in India. The court fee varies between 1% to 10% of the amount claimed/ value of the property, depending on the court fee applicable in the State in which suit is instituted.

Generally, a case has to be instituted at the place where the cause of action has arisen or where the defendant is residing and/or working.

Lawyers are not permitted to charge on success basis or on “no win no fee” basis.
The counsel’s fee is dependent on his seniority and demand.

Courts in India have a very conservative approach while awarding the litigation costs and may not match the actual expenses incurred.

ADJUDICATION

“Lok Adalat”, which broadly means ‘people’s court’ are used for adjudication under the provision of the Legal Services Authorities Act, 1987. A matter which is pending before a court can be referred to Lok Adalat by the court or on the application of a party/parties. This is a mode of dispute settlement forum shorn of rigorous technicalities of Code of Civil Procedure (CPC) and Law of Evidence. Lok Adalats are held intermittently and are not a permanent forum for adjudication of disputes. Lok Adalats try to bring about amicable settlement between the parties, pass orders with the consent of parties, which become final. If any party to dispute does not consent to the order, Lok Adalat cannot pass any order as to the issue.

“Permanent Lok Adalat” is specially constituted for the purpose of adjudicating disputes relating to public utilities. This Forum is also created under the provisions of the Legal Services Authorities Act, 1987. Unlike Lok Adalat, Permanent Lok Adalat has power to adjudicate the issue on merits if parties are not agreeing to an amicable consent order. In such an event, the adjudicating order passed by the Permanent Lok Adalat becomes final and binding on the parties to the dispute.

ALTERNATE DISPUTE RESOLUTION (ADR)

ADR consists of Conciliation and Arbitration. There is now a move towards institutionalised Conciliation andarbitration. Federation of Indian Chambers of Commerce and Industry Arbitration and Conciliation Tribunal (FACT), Indian Council of Arbitration (ICA), International Centre for Alternative Dispute Resolution (ICADR) are recognised institutions with a lot of credibility. ICC's international Court of Arbitration and other International Arbitral Tribunals are also used extensively.

CONCILIATION

The Arbitration and Conciliation Act, 1996 (ACA) has given statutory recognition to dispute resolution through Conciliation. The parties may agree to refer a dispute to Conciliator, who can bring the parties to the negotiating table and try to reach a negotiated settlement of disputes. Conciliation process can be used in a pending litigation or arbitration. Notwithstanding anything contained in any other law for the time being in force, the conciliator and the parties shall keep confidential all matter relating to the conciliation proceedings. To encourage the Parties to approach Conciliation process with an open mind, it is stipulated that the parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the conciliation proceedings:

• the views expressed or suggestions made by the other party in respect of a possible settlement of the dispute.
• admissions made by the other party in the course of the conciliation proceedings.
• proposals made by the conciliator.
• the fact that the other party had indicated to accept a proposal for settlement made by the conciliator.

The salient features of conciliation are that:

• A conciliator does not give a decision. His main function is to encourage the parties themselves to come to settlement.
• A conciliator is required to be guided by the principles of "objectivity, fairness and justice" and the conciliator, with the consent of the parties devise the procedure or follow the procedure, if any, of an institution selected by the parties.
• A conciliator does not engage in any formal hearing, though a conciliator may informally consult the parties separately or together.
• A conciliator may, at any stage, propose a settlement, even orally, and without stating the reasons for the proposal.
• A conciliator may invite the parties (for discussion) or communicate with them jointly or separately.
• Parties themselves must, in good faith, co-operate with the conciliator and supply the needed written material, provide evidence and attend meetings.
• A party may submit to the conciliator its own suggestions for the settlement of a dispute.
• A settlement agreement signed by the parties and authenticated by the conciliator will be final and binding.
• The settlement agreement has the same status and effect of an arbitral award/decree of court.
• During the conciliation proceedings, a party is debarred from initiating arbitral or judicial proceedings on the same dispute, except such proceedings as are necessary for preserving its rights.
• Unless otherwise agreed by the parties, the conciliator cannot act as arbitrator, representative or counsel in any arbitral or judicial proceedings in respect of the conciliated dispute. Nor can the conciliator be "presented" by any party as a witness in such proceedings.
• The cost of the conciliation is fixed by the conciliator and then a written notice is given to each of the party.
• The parties bear the cost equally unless the parties have signed a settlement agreement and it provides for a different payment option.

ARBITRATION

The Arbitration and Conciliation Act, 1996 (ACA) based on UNCITRAL Model Law on International Commercial Arbitration in 1985 is the statute which governs arbitration.

ACA is a consolidated single enactment relating to arbitration, conciliation and enforcement of foreign awards. Arbitrations can be based on an ‘arbitration agreement’ between the parties or a statutory arbitration. “Statutory Arbitrations” are arbitrations in respect of disputes arising on matters covered by certain Acts, which Acts stipulate arbitration as remedy for such disputes. There are about 24 such Central Acts including the Indian Electricity Act, 2003, the Indian Telegraph Act, 1885, The Land Acquisition Act, 1894, the Railways Act, 1890 and the Forward Contracts Regulation Act, 1956. Many State Acts also provide for arbitration in respect of disputes covered by those Acts, including Acts relating to co-operative societies.

Distinctive features are:

• Minimum or no interference from courts.
• Provides for Domestic and international arbitration.
• Provisions for enforcement of foreign awards, recognises the Geneva Convention of 1927 and the New York Convention of 1958.
• The arbitrator can decide on his own jurisdiction. This has reduced interference by courts.
• An award can now be set aside if it is in conflict with “the public policy of India”, a ground which covers "inter-alia" fraud and corruption.
• The importance of transnational commercial arbitration has been recognized and it has been specifically provided that even where the arbitration is held in India, the parties to the contract would be free to designate the law applicable to the substance of the dispute.
• ACA confers the status of a decree on the arbitral award shall be final and binding on the parties and persons claiming under them respectively.
  The grounds on which the award of an arbitrator could be challenged is limited and is in line with UNCITRAL Model Law on International Commercial Arbitration in 1985.
• If one of the parties is non-Indian the arbitration shall be considered as international commercial arbitration.
• International Commercial arbitration can take place either within India or outside India in cases where there are ingredients of foreign origin relating to the parties or the subject matter of the dispute.
• In International Commercial Arbitration the sole arbitrator/ third arbitrator can be from a neutral country.
• The law applicable to the conduct of arbitration and the merits of the dispute may be Indian law or foreign law, depending on the contract in this regard, and the rules of conflict of laws.

ENFORCEMENT OF FOREIGN AWARDS – CONVENTION COUNTRIES

A foreign award can be enforced in India under the multilateral international conventions to which India is a party, namely, the Geneva Convention of 1927 or the New York Convention of 1958, if the said Convention applies to the relevant arbitration. The foreign award must have been made in a country which has ratified the Geneva Convention of 1927 or the New York Convention of 1958.

ENFORCEMENT OF AWARDS - NON-CONVENTION COUNTRIES

Foreign awards which are made in countries which are not parties to either the Geneva Convention or the New York Convention can be enforced through the provisions of ACA. This position has been clarified by the Supreme Court of India.

CONCLUSION

Considering the Indian scenario, especially delays in courts, it is advisable to have a proper ADR provisions in all contracts. The applicable law, jurisdiction and place where the ADR proceedings will take place etc. can be agreed to between the Parties. Even if you elect to have Indian law as applicable law it is possible to choose international forums and/or arbitrators from neutral countries, which can ensure satisfactory results to all the parties.