Is ADR a Viable Alternative in the Realm of Consumer Disputes?

By Adv. Tariq Khan (Principal Associate, Advani & Co.) & Aishvarya Rajesh

This image has an empty alt attribute; its file name is image-6.png

Abstract

India today, suffers largely from the backlog of cases that suffocate the courts and their effective functioning. A simpler, faster and more effective mode of dispute resolution in the form of ADR is thus the need of the hour. Increasingly, gaining importance in the international sphere, ADR is not only cost and time effective but also allows for a simpler and comparatively less formal process which is more suitable for a layperson.

Introduction 

To begin an analysis of the utility and viability of ADR for consumer disputes in India, it is essential to first understand what a consumer dispute is and the different forms of ADR mechanisms recognised in India for the purpose of resolving consumer disputes. The newly introduced Consumer Protection Act, 2019 (“COPRA, 2019”) introduced a mechanism of Alternate Dispute Resolution in the form of Mediation to resolve Consumer Disputes.   

A consumer dispute is defined as “a dispute where the person against whom a complaint has been made, denies or disputes the allegations contained in the complaint[1]. This broad definition of consumer disputes has been carried forward from the old COPRA, 1986.[2]  

The UK has a comparatively more detailed definition of Consumer Disputes that is split into “Cross-Border Dispute” and “Domestic Dispute”.[3] The most striking difference between the idea of the definitions in the Indian and UK legislative counterparts is UK’s limitation of Consumer Disputes to those that arise out of the Contract for Sale or Service as the case may be.[4]

There are many different forms of ADR Mechanisms. For civil cases in India, the most common forms are Mediation, Arbitration, Judicial Settlement, Conciliation and Lok Adalat. In India, legal recognition has been given to some forms of ADR such as in certain special cases of Consumer Disputes. This stems from the introduction of ADR in the Civil Procedure Code, 1908 detailed in Section 89 read with Order 10 Rules 1-A to 1-C.[5]

Use of ADR for Consumer Disputes

In India

1.     Tracing the evolution of the process of dispute resolution for Consumer Disputes 

The aim of the COPRA, 1986 was to better affirm and protect the interests of the Consumers and further to provide a mechanism to resolve any dispute that may arise. Although equipped with Consumer Fora, many reports and criticisms suggest that these have practically turned into civil courts thus negating their purpose of being faster and more approachable.[6]

The introduction of ADR across various types of disputes in India can be traced back to the Bengal Regulation Act, 1772, which provided that in instances of addressed records an official mediation would take place in the presence of a mediator. Subsequently, the Arbitration Act, 1899, was enacted to promote out of court settlements which was then repealed and replaced by its 1940 counterpart and further supplanted by the Arbitration and Conciliation Act, 1996. These, along with the provisions of the CPC, have encouraged the privatization of disputes and have found their way into Consumer Disputes.[7] 

Consumer Disputes often call for creative solutions as it is difficult to apply precedent to such one-off and highly specialized cases. Given their nature, they demand “win-win” solutions.[8] This is something ADR can provide that the courts cannot since they are bound by and limited to the law. Further, ADR provides for both kinds of dispute requirements – first, quantitative and efficient; and second, qualitative and voluntary/deliberative participation.[9] This makes it all the more imperative in settling Consumer Disputes.

2.     Consumer Protection Act, 2019 and ADR

Chapter V of the COPRA, 2019, has been dedicated to Mediation as a method of consumer grievance redressal and Sections 74 to 81 lay down the requirements and procedure in which such mediation should take place and essentially serves as the guidelines for the process of mediation within the field of consumer rights. The mediation centres established under the COPRA, 2019, would function under the aegis of the Consumer Commissions as well as the State Governments. The Central Government would be responsible in deciding the composition of such a mediation cell.

Procedure of the mediation process is laid down under Section 79. Further Section 80 explains settlements of issues through mediation and the role that a Mediator plays in cases where either all issues have been settled by both parties or only some issues have been settled and others are left to be settled and lastly, in cases where there has been absolutely no agreement between the parties in dispute.  

All consumer disputes can be referred to mediation other than[10] matters relating to medical negligence that result in grievous injury or death; offenses relating to defaults committed, wherein applications of compounding of offenses have been filed by one or more parties; Cases involving serious allegations of fraud, forgery, impersonation, fabrication of documents, coercion, PIL, criminal prosecution and non-compoundable offenses.

In the EU

Given the increasing popularity and awareness surrounding ADR mechanisms as an effective means of resolving consumer disputes, the International Consumer Protection and Enforcement Network (ICPEN) provided a directory of the ADR bodies in all of the participating countries.[11] 

The European Union (EU”), recognized the importance of utilizing ADR mechanisms for resolving Consumer Disputes way back in 2008 and has since been developing and improving the framework and regulations for the same as opposed to changing the substantive law as such.[12] The EU passed a Directive on certain aspects of mediation in 2008 (the ‘Mediation Directive’) to deal with matters that are civil and commercial in nature. In 2013, the EU passed a directive – the ‘ADR Directive’ and an accompanying regulation – the ‘ODR Regulation’.[13] The EU has come to introduce the notion of Consumer Alternative Dispute Resolution (CADR) alias Consumer Dispute Resolution (CDR).[14]

The Directive and Regulation (EU) No. 524/2013 of the European Parliament and of the Council on online dispute resolution for consumer disputes are two interlinked and complementary legislative instruments. The 2013 EU Directive on Consumer Disputes provides for the establishment of an ODR platform to provide consumers and traders a single point of entry for resolving disputes in an out-of-court manner, through ADR entities which are linked to the platform. These ADR entities offer ADR through quality ADR procedures and they are a precondition for the proper functioning of the ODR platform.[15] 

Qualifications for becoming a mediator for consumer disputes

In India

Section 75, COPRA, 2019, provides for the empanelment of Mediators to resolve Consumer Disputes at the official Mediation Cells set up by the Central and District courts. It provides that all the necessary details regarding qualifications, eligibility, fees, code of conduct and other relevant aspects have been dealt with under the Consumer Protection (Mediation) Regulations, 2020. Regulation 3 deals with the eligibility for empanelment of Mediator and consists of – retired Judges of High Courts/Supreme Court/District Courts/Sessions Courts; retired members of a Consumer Commission or Higher Judicial Services of a State; retired Judicial Officer and Advocates with at least 10 years of experience with the bar; Mediators empanelled with the Mediation Cells of the Supreme Court/High Court/District Court;  persons with at least 5 years of experience in mediation/conciliation; retired senior bureaucrats/executives; experts/professionals with at least 15 years of experience.[16] This is coupled with the provisions of Regulation 9 which says that those experts nominated by the Mediation Cell would provide compulsory training to the mediators.[17]

The NCDRC has put forth certain qualifications, provisions for the required training and procedure for the empanelment of mediators. Qualified Mediators will have to mandatorily undergo 40 hours of training. While the training procedure definitely contributes to a sense of faith and credibility, the parties have nowhere to go to raise concerns regarding the mediator.[18] Further, there is no standardized and uniform set of metrics that Mediators would have to meet in order to be “Qualified Mediators” which could possibly create a discrepancy across the empanelled mediators.[19] The eligibility criteria are ambiguous and do not specify the requirements for the particular training that the mediators would receive under the COPRA, 2019. It must be realized that mere long-term practice of the law or being a long-term subject matter professional does not imply the ability to mediate consumer disputes. Further, when mediators are appointed by the parties themselves, these guidelines are only suggestive which could create further concerns regarding the authenticity of the mediation process.[20] The suggestions given by the panel headed by Niranjan Bhat that recommends a legislation for a Code of Conduct for Mediators could be the first step in the way forward for India.[21]

In the EU

The need for a Supranational Standard that would regulate Mediator Qualifications was also recognized by the EU with regards to their 2008 EU Mediation Directive.[22] The absolute majority of Mediators across the EU seem to fulfil a requirement of a minimum of 3 year diploma in any post-secondary training for higher education and ALSO professional training such as Professional Mediation Training as required by Article 11(d) of the Professional Qualifications Directive.[23] The European Commission for The Efficiency Of Justice outlines the good practices by member states of the EU and contains recommendations for such a supranational defined qualification metric for Mediators.[24]

The Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 provides a general requirement that ADR providers who wish to become qualified mediators must meet certain standards with regard to independence, impartiality, and quality of expertise.[25] However, at present there are no statutory qualifications to qualify as a mediator although it is common to check for accreditation for mediation and experience in the subject matter of the dispute.[26] 

Recommendations

  • There is a need to get an ombudsman involved so that the parties to the dispute may raise the concerns that they have regarding any mala fide act on the part of the mediator. The ombudsman would also help in the faster resolution of such concerns. 
  • In the 9th Standing Committee Report on Food, Consumer Affairs and Public Distribution (2015-16), the representatives of the Consumer Guidance Society of India suggested that Mediation should be mandatory before litigation; amongst many other suggestions.
  • Methods of dispute resolution such as arbitration, conciliation, mediation and Lok Adalats can be introduced and incorporated in a manner similar to how the Mediation cell has been incorporated in the COPRA, 2019 legislation.
  • Online Dispute Resolution (“ODR”) mechanisms for dispute resolution over the web as well as serving of electronic notices may be encouraged to reduce delays and also ease the process for Cross-border disputes between an Indian resident party and an internationally resident party.[27] This should also have a legislation of its own as has been done in the EU.[28]
  • The Consumer Fora and the CCPA should be given the status akin to Judicial Authority for the purpose of section 8(1), Arbitration and conciliation Act, 1996, and thereby be allowed to refer consumer disputes to Arbitration and enforce arbitration clauses.[29] 
  • Mediation is voluntary and non-binding on the parties at present although there have been several recommendations to allow for it to be binding.[30]

Conclusion

The increasing backlog and heavy pendency of cases in consumer disputes and the delay in their resolution would have a negative impact on the consumers as stakeholders and the amount of trust they repose in the consumer justice system. Thus, the introduction of Mediation as a means of Alternative Dispute Resolution can significantly change the current consumer justice system by not only reducing and sharing the burden of consumer courts and fora but by also being accommodating to the needs of cases with smaller values and parties from backgrounds of low income; by being a less formal, less complex, quicker, voluntary and more cost-effective means to arrive at a mutually beneficial status for both parties. They can also assist in empowering consumers against buyer-seller contracts in which the contract is majorly tilted in favour of the seller.[31] Thus, increasing awareness about and strengthening consensual alternatives such as mediation would play a crucial role in the economic growth of a country like India and make the market system a safer and more consumer-centric field.

Disclaimer – All views and opinions expressed in this article are personal and belong solely to the author(s) and do not necessarily represent those of the LAABh Foundation or the individuals and institutions associated with LAABh Foundation.


[1] S. 2(8), Consumer Protection Act, 2019.

[2] S. 2(e), Consumer Protection Act, 1986.

[3] S. 5, A consolidated version of the Alternative Dispute Resolution for Consumer Disputes Regulations 2015, Civil Aviation Authority.

[4] S. 5, A consolidated version of the Alternative Dispute Resolution for Consumer Disputes Regulations 2015, Civil Aviation Authority.

[5] Section 89 read with Order 10 Rules 1-A to 1-C, CPC; Report No. 238 of Law Commission of India, Amendment of Section 89 of the Code of Civil procedure, 1908 and Allied Provisions, (2011).

[6] CUTS-International, “State    of    The   Indian    Consumer   Analyses    of    the Implementation of the United Nations Guidelines for Consumer Protection, 1985 in India”, 2012, available at < http://www.cuts-international.org/Cart/pdf/State_of_the_Indian_- Consumer.pdf. >;  https://www.thehindu.com/news/national/kerala/delayed-justice-from-consumer-courts/article28662030.ece; https://economictimes.indiatimes.com/special-report/are-consumer-courts-really-serving-the-consumers/articleshow/7959190.cms

[7] Report No. 222 of Law Commission of India, Need for Justice-dispensation through ADR etc., (2009).

[8] Shah,  Namrata  and  Niyati  Gandhi,  “Arbitration:  One  Size  Does  Not  Fit  All: Necessity  of  Developing  Institutional  Arbitration  in  Developing  Countries”, available   at < https://media.neliti.com/media/publications/28786-EN-arbitration-one-size-does-not-fit-all-necessity-of-developing-institutional-arbi.pdf >

[9] Carrie Menkel-Meadow, “The History and Development of “A” DR (alternative/appropriate dispute resolution)”, Völkerrechtsblog, 1 July 2016, doi: 10.17176/20180220-230945 

[10] The Consumer Protection (Mediation) Rules, 2020.

[11] Durovic, M., “International Consumer Law: What Is It All About?”, J Consum Policy 43, pp. 125–143 (2020). https://doi.org/10.1007/s10603-019-09438-9

[12] Jagna Mucha, “Alternative Dispute Resolution for Consumer Disputes in the European Union: Challenges and Opportunities”, Queen Mary Law Journal, <https://www.qmul.ac.uk/law/media/law/docs/undergrad/04-Mucha.pdf >

[13] Horst Eidenmüller and Helge Großerichter, “Alternative Dispute Resolution and Private International Law” (https://poseidon01.ssrn.com/delivery.php?ID=696117021029084087117121096081124092003022059077010067123121077126081084018091002124055045059003055045042125119010029009121100061052089087080013095082015028000007052011024125104113096027111103099118088001064085094029066001091104111026104030126083114&EXT=pdf&INDEX=TRUE)  

[14] Naomi Creutzfeld “Alternative Dispute Resolution for Consumers” cited in Jagna Mucha, “Alternative Dispute Resolution for Consumer Disputes in the European Union: Challenges and Opportunities”, Queen Mary Law Journal, <https://www.qmul.ac.uk/law/media/law/docs/undergrad/04-Mucha.pdf >

[15] Clause 5, Official Journal of the European Union < https://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1490091045657&uri=CELEX:32013L0011 >

[16] Regulation 3, Consumer Protection (Mediation) Regulations, 2020.

[17] Regulation 9, Consumer Protection (Mediation) Regulations, 2020; Mediation Training Manual of India, Mediation and Conciliation project Committee, Supreme Court of India, available at https://www.mediate.com/pdf/MT%20MANUAL%20OF%20INDIA.pdf 

[18] Dr. Banamali Barik, “ADR Mechanism and The Redressal Of Consumer Grievances Within The Three-Tier Consumer Adjudicatory System In India: An Analysis”, South Asian Law Review Journal ISSN 2456 7531 Volume 5 – 2019, p. 379-398.

[19] Sheetal Kapoor, “Mediation and Consumer Protection”, available on SCC Online 7 IJCLP (2019) 74. 

[20] Rakhi, “Who Can Be a Mediator: Qualifications or Disqualifications”, White Code VIA Mediation Centre, < https://viamediationcentre.org/readnews/MzY3/Who-Can-be-a-Mediator-Qualifications-or-Disqualifications >

[21] https://economictimes.indiatimes.com/news/politics-and-nation/supreme-court-forms-committee-to-draft-mediation-law-will-send-to-government/articleshow/73394043.cms?from=mdr

[22] Ashley Feasly, “Regulating Mediator Qualifications in the 2008 EU Mediation

Directive: The Need for a Supranational Standard”, Ar. 5, Issue 2, Vol. 2011, Journal of Dispute Resolution  < https://scholarship.law.missouri.edu/cgi/viewcontent.cgi?article=1629&context=jdr >

[23] AIA European Network of Mediation Centres < https://www.arbitration-adr.org/network/AIA%20European%20Mediation%20Network_Booklet.pdf >

[24] EUROPEAN COMMISSION FOR THE EFFICIENCY OF JUSTICE (CEPEJ), ” European Handbook for Mediation Lawmaking”, 14 June 2019 < https://rm.coe.int/cepej-2019-9-en-handbook/1680951928 >

[25] Department for Business Innovation & Skills, Government of UK, “Policy Paper: Alternative Dispute Resolution for Consumers”, 23 June 2015, available at < https://www.gov.uk/government/publications/alternative-dispute-resolution-for-consumers/alternative-dispute-resolution-for-consumers  >

[26] Linklaters, “Commercial Mediation – A Global Review”, available at < https://www.linklaters.com/en/insights/publications/commercial-mediation-a-global-review/commercial-mediation-a-global-review/uk >

[27] Julio C´esar Betancourt & Elina Zlatanska, “Online Dispute Resolution (ODR): What Is It, and Is It the Way Forward?” 79 ARB. 256, 258 (2013).

[28]REGULATION (EU) No 524/2013 OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL of 21 May 2013 on online dispute resolution for consumer disputes and amending Regulation (EC) No 2006/2004 and Directive 2009/22/EC (Regulation on consumer ODR) < https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:165:0001:0012:EN:PDF

[29] Vaibhav Thakuria, “Arbitration As An Alternative Dispute Resolution For Consumer Disputes” available on

 Mondaq at < https://www.mondaq.com/india/arbitration-dispute-resolution/691064/arbitration-as-an-alternative-dispute-resolution-for-consumer-disputes >

[30] https://www.hindustantimes.com/india-news/devise-law-to-make-mediation-agreements-binding-cji-sa-bobde/story-ARqyLBj7t2oZhQGQKqFPPM.html

[31] Vanenkova Irena, “IMI Comments on EC Consultation Paper: On the use of  ADR schemes  to resolve disputes related to commercial transactions and practices”, available at http://www.arbitrationindia.org/pdf/tia_3_5.pdf.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: