Updated: Aug 29, 2020
In this article, we are giving outline of Indian legal system by giving details of various authorities and forums where various disputes can be resolved. In addition to a strong legal system, India has signed various International Conventions dealing with enforcement and recognition of foreign arbitral awards in India.
In India, disputes may be resolved through traditional courts, specialised tribunals or alternative dispute resolution mechanisms that include arbitration, mediation, conciliation and lok adalats.
The major laws codifying procedure of courts in India are the Code of Civil Procedure 1908 (CPC) and the Code of Criminal Procedure 1973 (CrPC). Charter High Courts like High Courts of Bombay, Calcutta, Delhi and Madras may also apply exercise the original jurisdiction under the Letters Patent Rules, and these rules override the provisions mentioned in the CPC.
There are various specialized tribunals which are established under various enactments. The procedure to be applied by these tribunals is mostly governed by the statute which established them (and the rules framed under the statute).
Under Section 89 and Rules 1A, 1B and 1C in Order 10 of CPC, settlement of disputes through Alternative Dispute Resolution mechanism is provided. The Indian Courts have also recognized the importance of Alternative Dispute Resolution (ADR). Arbitration is one of the popular ADR mechanisms in India. The Arbitration and Conciliation Act 1996 (the Arbitration Act) governs the law related to domestic arbitration, international commercial arbitration, foreign-seated arbitration and enforcement of foreign awards, in India. The Arbitration Act is based on the UNCITRAL Model Law on International Commercial Arbitration.
Courts in India
The fundamental source of law in India is the Constitution of India (COI). It has given due recognition to statutes, case laws, and customary law. Further, the COI establishes the court system in India. A single integrated judicial system is a distinctive feature of the judicial system in India. The Supreme Court is at the apex of the entire judicial system, followed by High Courts and their benches in each state or group of states. Below each state’s High Court lies a hierarchy of subordinate courts. Some states also have Panchayat Courts under various names like Nyaya Panchayat, Panchayat Adalat, and Gram Kachheri to decide civil and criminal disputes of petty and local character. Lok Adalat is another form of judicial forum that has been set up to dispose of the smaller cases.
The Supreme Court of India is the final interpreter of the Constitution and the laws of the land. The Supreme Court has the original and exclusive jurisdiction to resolve disputes between the Centre and one or more states and union territories, as well as disputes between different states and union territories.
In addition, Article 32 of the Constitution gives an original jurisdiction to the Supreme Court in regard to the enforcement of Fundamental Rights guaranteed by the Constitution. It is empowered to issue directions, orders and writs in the nature of habeas corpus, mandamus, prohibition, quo warranto and certiorari. The Supreme Court also has a very wide appellate jurisdiction over all courts and tribunals in India in as much as it may, in its discretion, grant special leave to appeal under Article 136 of the Constitution from any judgment, decree, determination, sentence, or order. The appellate jurisdiction of the Supreme Court can be invoked by a certificate granted by the concerned High Court, in respect of any judgment, decree or final order of a High Court in, both civil and criminal cases.
Next in hierarchy are the High Courts, which are placed directly under the Supreme Court. Each High Court consists of a Chief Justice and a number of other judges. The High Court entertains appeals from lower courts and tribunals which lie within its jurisdiction. It also acts as a court of revision for the orders of the subordinate courts and the tribunals. Some High Courts in India also exercise original jurisdiction in civil and admiralty matters.
In order to improve the Indian legal system, the Government in 2015 passed the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015.
Under this Act, commercial divisions of the High Courts were established in areas where High Courts have ordinary original civil jurisdiction. These commercial divisions dealt with disputes of commercial nature of specified value i.e. INR 10,000,000 or higher. However, the Commercial Courts was amended in 2018 and the amendment reduced the specified value to INR 300,000. Moreover, the amendment established commercial courts at the level of district judge even in places where High Courts exercise ordinary original civil jurisdiction.
The State governments have the discretion to specify the pecuniary jurisdiction of such Commercial Courts.
Next in the hierarchy of the courts are the lower or subordinate courts. The highest civil court in each district is that of the District Judge. Below such courts, there are several others, depending on the set up of each district, including the Court of Small Causes for petty matters. On the criminal side, the highest court is the court of the Sessions Judge, which has the power to impose any sentence, including capital punishment.
Tribunals in India
Tribunals are statutory adjudicatory bodies that address disputes which fall within the ambit of their parent statutes. In India, various Tribunals have been set up from time to time, both at the centre level and the state level, to deal with disputes of various laws relating to activities like banking, industry, trade, taxation etc.
Specialised Tribunals such as National Company Law Tribunal (NCLT), Debt Recovery Tribunal (DRT), Securities and Exchange Board of India and Securities Appellate Tribunal, Competition Commission of India, Tax Tribunals, Consumer forums and National Green Tribunal, among others are established under various enactments in India.
NCLT have been vested with the jurisdiction in respect of insolvency and restructuring proceedings against corporate persons in India, whereas the DRT oversees proceedings against individuals and partnerships. NCLT also has the exclusive jurisdiction to deal with matters concerning with the company laws.
National Green Tribunal is a specialised body set up under the National Green Tribunal Act (2010) for effective and expeditious disposal of cases relating to environmental protection and conservation of forests and other natural resources.
Real Estate (Regulation and Development) Act, 2016 (“RERA Act”) was enacted in order to set up a Real Estate Regulatory Authority in every State for regulating the real estate sector and to provide consumers/home buyers a specific tribunal for adjudication of property disputes. Appeals from orders of RERA may be led before Real Estate Appellate Tribunal.
Apart from the abovementioned tribunals, there are various tribunals in India which are established for a specific purpose. Courts have held that the principles contained in the CPC would continue to apply to the tribunals even if the tribunals are not bound to follow specific provisions of the CPC.
Alternative Dispute Resolution in India
The arbitration framework has been outlined in the Arbitration Act which contains provisions for various issues such as the interpretation of the arbitration agreement, interim measures that can be granted, appointment, substitution and termination of arbitrators, place and procedure for the arbitration and grounds for setting aside of the arbitral award. It is to be noted that India is also party to the three main international conventions that govern international arbitrations in different territories and that have been consolidated under the A&C Act:
the Geneva Protocol on Arbitration Clauses of 1923;
the Convention on the Execution of Foreign Awards 1923 (the Geneva Convention); and
the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention).
The Arbitration Act is applicable both to domestic or India seated arbitrations and foreign-seated arbitrations. Part I of the Act covers the scope of domestic arbitrations, whereas Part II covers foreign-seated arbitrations and the enforcement of the foreign arbitral awards. Part I defines the scope of arbitration, the essentials of an arbitration agreement and the procedure for determining the validity of such an arbitration agreement. It is essential to note that there are limited grounds and time-bound procedures for challenging the validity of such an agreement and the arbitral tribunal has the power to determine its jurisdiction (Kompetenz-kompetenz). It should be noted that Section 5 of the Arbitration Act specifically provides that no judicial authority may intervene in arbitration except in a case where a stipulation to this effect has been made.
Apart from Arbitration, Mediation is one other form of ADR mechanism present in India. The most important element of mediation is that it is the parties to the dispute who decide the settlement terms. On the other hand, in conciliation, the conciliator makes proposals, and formulates the terms of settlement. In India, Mediation was first given statutory recognition in the Industrial Disputes Act 1947, where officers appointed are charged with the duty of mediating and promoting the settlement of industrial disputes. Mediation, as a form of dispute resolution has not obtained independent force in India but is mostly institutionally annexed to the courts through Section 89 of the CPC.
Another essential point to be noted is the growing importance of mediation clauses in the commercial agreements. Both mediation and consultation form a mandatory aspect of multi tier dispute resolution clauses. In an event that the dispute is referred first to arbitration, the tribunal or the court has the power to render the claim/petition inadmissible on the grounds of the pre-arbitration procedure prescribed by the agreement being violated by the parties. The government has taken following steps to promote use of mediation on India:
Amendment to Commercial Courts Act, 2015 making it mandatory to resort to mediation before initiating court proceedings;
Signing of the United Nations Convention on International Settlement Agreements (UNISA);
Conciliation has been inserted under Part III of the Arbitration Act and is less formal than arbitration, but more formal than mediation. To the extent, it requires only mutually consenting parties and not a formal written document executed to be able to conciliate. As per the A&C Act, the parties can appoint up to three conciliators. Like other dispute resolution mechanisms, an important requirement of conciliation proceedings is the independence and impartiality of the conciliator. The conciliators form a communication medium between the parties inviting them for proceedings and helping them exchange documents and evidence. When the conciliator is of the opinion that elements of a settlement exist, they can draw up the terms of conciliation and, after being signed by the two parties, it shall be final and binding on both the parties.
Online Dispute Resolution in India
Online Dispute Resolution (ODR) is a branch of dispute resolution which uses technology to facilitate the resolution of disputes between parties. This primarily involves negotiation, mediation or arbitration, or a combination of all three. In India, Domain Name Disputes are being solved through ODR (Online Dispute resolution). Domain Name Disputes arise when more than one individual or group believes it has the right to register a specific domain name.
NestAway, a start-up which is India's fastest growing "Managed Home Rental Network" is providing rental solutions and has been resolving its disputes using ODR platforms. Another initiative to promote ODR can be seen in the form of establishment of the Centre for Online Dispute Resolution (CODR), which has positioned itself as an institution that will administer cases online.
India judicial system accommodates variety of Dispute Resolution mechanisms. With the increasing burden on Courts, the specialized tribunals and the ADR mechanisms were built.
Indian government along with the Indian Courts is trying hard to become a dispute resolution hub. In the recent past, lot of improvement has been noticed in terms of dispute resolution services of India.
The structure and hierarchy of the Indian courts accommodates all kind of disputes and provides a suitable mechanism for resolution of the disputes. By introducing various new legislations and amending the old ones, the legislature is committed in providing efficiency in resolving commercial disputes in India.
About the authors:
Mr. Krishan Singhania, the Managing Partner & Founder of K. Singhania & Co. has graduated in Law from Campus Law Centre, Delhi University and completed a course on Patent Law from Cambridge University, U.K. He is a seasoned professional with comprehensive experience of over 30 years. K. Singhania & Co. has had unrivalled success under his dynamic and determined leadership. His legal expertise in corporate & commercial law, arbitration, maritime, aviation, foreign direct investments is highly respected in the industry and his ideas and opinions can be found in popular legal newsletters and international journals. He has consistently been ranked amongst the top 100 lawyers and legal icons of the country in the annual A-List feature of India Business Law Journal. Owing to his experience of working as a foreign lawyer in New York and London, he brings international best practices to the Firm.
Mr. Alok Vajpeyi is an Associate, working in the Disputes Team at K Singhania & Co., Mumbai. He is a qualified Tribunal Secretary certified by Hong Kong International Arbitration Centre (HKIAC). His core practice areas are commercial arbitration, litigation under Arbitration and Conciliation Act and general commercial litigation before National Company Law Tribunal and the High Court. He has also given advise in matters relating to Foreign Exchange Management Act, Securities Law, Customs law and transfer of shares. He has been invited as a guest speaker in various conferences in India and he also judges lot of Arbitration and Mediation competitions conducted in India and abroad.