Alternative Dispute Resolution as a Strategic Imperative for Indian Businesses

In the dynamic landscape of business, disputes are inevitable. However, the traditional litigation process, characterized by its adversarial nature, lengthy procedures, and public scrutiny, often proves to be a double-edged sword. Businesses, particularly in India, are increasingly recognizing the advantages of Alternative Dispute Resolution (ADR) mechanisms like arbitration and mediation. These mechanisms not only offer a faster and cost-effective resolution but also preserve commercial relationships and maintain confidentiality. This analysis delves into the benefits of ADR, supported by data and real-world examples, to illustrate why businesses should prioritize ADR over litigation. The rising importance of institutional arbitration is underscored by the MCIA’s 2024 Annual Report, which reveals a 48% surge in new cases. The report also showcases efficiency and enforceability, as 91% of awards were delivered within 18 months, and none were set aside by courts.[1] With a significant number of commercial cases (i.e. upto 30,000 cases) pending in Indian courts (NJDG)[2], the adoption of ADR becomes not just an alternative, but a strategic imperative.

Legislative Evolution and Current Adoption Trends

Historical Foundations of ADR in India

India’s ADR framework gained structural coherence through the Arbitration and Conciliation Act, 1996, which adopted the UNCITRAL Model Law to align with global standards. The 2015 and 2019 amendments introduced groundbreaking reforms:

• Mandatory disclosure of arbitrator conflicts under Section 12(1)(a)
• Strict 12-month timeline for award delivery under Section 29A
• Establishment of the Arbitration Council of India under Section 43C

These changes reduced arbitration durations from an average of 18 months pre-2015 to 8.5 months post-2019, as per the Indian Law Institute’s 2023 efficiency audit. The Commercial Courts Act, 2015 further incentivized ADR by mandating pre-litigation mediation for disputes under ₹10 lakh, a threshold raised to ₹50 lakh in 2023 amendments.

Time efficiency:

With an average of nearly four years to resolve a commercial dispute in India, making the country the world’s third worst place on this front, the adoption of ADR becomes not just an alternative, but a strategic imperative. The ADR mechanisms like arbitration and mediation offer significant time savings. The Arbitration and Conciliation Act, 1996, mandates that arbitration proceedings be completed within 12 months from the date of completion of pleadings.[3] This time efficiency is crucial in a fast-paced business environment where delays can lead to substantial financial losses and reputational damage. Arbitration institutions like the Mumbai Centre for International Arbitration (MCIA) further exemplify efficiency: 91% of its awards in 2024 were delivered within 18 months, with no awards set aside by courts[4].  For businesses, this translates to quicker closure and reduced operational disruption.

Cost Efficiency: A Tangible Benefit

The cost of litigation in India is prohibitive, with legal fees, court fees, and the opportunity cost of delayed resolutions adding up. Legal expenses for Indian corporations has surged by 17 per cent in the last financial year (FY24), driven by increased international deal activity, substantial costs related to dispute resolution, and higher compliance expenses, according to annual reports from the top 500 local companies, as reported by The Economic Times (ET).

For the financial year ending March 2024, the Nifty 500 companies incurred Rs 52,568 crore ($6.26 billion) in legal costs, marking a 17.03 per cent increase from the previous year’s Rs 44,920 crore, as reported by ET Intelligence Group (ETIG), ET’s research arm.[5]

Now, For instance, a high-value commercial litigation case can cost upwards of INR 50 lakh[6], while arbitration can reduce this by 30-40%. The Indian judiciary has also emphasized the economic benefits of ADR. In the case of Afcons Infrastructure Limited v. Cherian Varkey Construction[7], the Supreme Court underscored the need for businesses to adopt ADR to reduce litigation costs.

Confidentiality: A Cornerstone of ADR

ADR mechanisms provide a confidential environment for dispute resolution. Unlike litigation, where proceedings and outcomes are public records, arbitration and mediation maintain the privacy of discussions and agreements. This confidentiality is particularly valuable in industries like pharmaceuticals, IT, and finance, where trade secrets and sensitive negotiations must remain protected.

Flexibility: Tailoring Solutions to Business Needs

ADR offers unparalleled flexibility, allowing parties to tailor the process to their specific needs. Businesses can choose arbitrators or mediators with industry-specific expertise, ensuring that decisions are informed by relevant knowledge. The seat, venue, and procedural rules can also be customized to suit the parties’ convenience. This flexibility is especially beneficial in cross-border disputes, where cultural and legal differences can complicate resolutions. Our IAMC,  the Mumbai Centre for International Arbitration (MCIA) and the Delhi International Arbitration Centre (DIAC) are prime examples of institutions providing such tailored solutions, enhancing the efficiency and effectiveness of dispute resolution.

Preservation of Relationships: A Strategic Advantage

One of the most significant advantages of ADR is its ability to preserve and even enhance business relationships. The collaborative nature of mediation fosters mutual understanding and win-win solutions. Through mediation, the parties not only resolved their differences but also renegotiated terms that strengthened their partnership. This outcome is a testament to how ADR can transform conflicts into opportunities for relationship building. The Supreme Court has also noted that agreements resulting from mediation are more likely to be complied with voluntarily and are more likely to preserve an amicable and sustainable relationship between the parties.[8]

Institutional Mediation and Arbitration: Government Initiatives

The Indian government has been proactive in promoting Alternate Dispute Resolution (ADR) mechanisms, particularly arbitration, to reduce the burden on the judiciary and ensure timely resolution of disputes.[9] Key initiatives include:

• Arbitration and Conciliation Act, 1996: This foundational legislation has been progressively amended in 2015, 2019, and 2020 to align with global best practices. The amendments focus on ensuring timely arbitration proceedings, neutrality of arbitrators, minimizing judicial intervention, and quick enforcement of arbitral awards. These changes aim to promote institutional arbitration and establish a robust arbitration ecosystem.[10]

Mediation Act, 2023

The Mediation Act, 2023 is a significant legislative development aimed at promoting and regulating mediation in India. Key features of the Act include:

• Pre-litigation Mediation: Parties are required to attempt mediation before approaching courts for civil or commercial disputes, except in cases involving urgent relief or criminal matters. This provision encourages amicable dispute resolution and reduces the judicial workload.[11]
• Institutional Mediation Framework: The Act establishes a framework for mediation service providers and a Mediation Council to oversee professional standards and accreditation of mediators. This ensures that mediation services are standardized and accessible.
• Time-bound Process: Mediation proceedings are to be completed within a specified timeframe, typically 120 days, extendable by 60 days with parties’ consent.
• Enforceability of Agreements: Settlements reached through mediation are legally binding and enforceable as court decrees, providing them with legal recognition.
• Confidentiality and Neutrality: Mediation proceedings are confidential, and mediators must remain neutral to ensure fairness and impartiality

Institutions like the IAMC, MCIA, and Delhi International Arbitration Centre (DIAC) play a pivotal role by offering structured frameworks, experienced arbitrators, and procedural discipline. These efforts collectively aim to reduce judicial backlog, enhance ease of doing business, and position India as a hub for international arbitration.

The concept of Deal Mediation

Deal mediation operates on the principle that “the best conflict management technique is conflict prevention.” The deal mediator serves as a neutral facilitator during negotiations, helping parties craft optimal agreements rather than merely acceptable ones. This approach differs significantly from traditional negotiation, where parties often engage in positional bargaining focused on dividing rather than creating value.[12]

The process typically involves:

1. A neutral third party participating from the earliest stages of deal discussions
2. Facilitating communication between parties with diverse interests and backgrounds
3. Identifying potential areas of conflict before they emerge
4. Helping parties articulate their underlying interests beyond stated positions
5. Creating an environment conducive to value creation rather than mere value division
6. Assisting with realistic risk allocation that prevents future conflicts

Key Advantages of Deal Mediation

Deal mediation offers numerous benefits that traditional negotiation approaches often miss:

Cultural Navigation: In today’s globalized business environment, deals increasingly involve parties from diverse cultural backgrounds with varying negotiation styles. A deal mediator can bridge these differences, preventing misunderstandings that might otherwise derail negotiations or create future conflicts.

Comprehensive Understanding: When a mediator participates from the beginning stages, they develop thorough knowledge of the deal’s intricacies. This institutional memory proves invaluable for anticipating and addressing potential disputes, particularly in complex transactions like international construction projects.

Interest Identification: Unlike direct negotiations where parties often become entrenched in positions, deal mediators excel at uncovering underlying interests. As demonstrated in the pharmaceutical company example from the document, parties might declare incompatible positions (both needing coconuts) while having compatible interests (one needing coconut water, the other needing coconut meat). A mediator helps identify these complementary interests.

Realistic Risk Allocation: One of the most critical yet often overlooked aspects of deal-making is appropriate risk allocation. Traditional negotiations frequently result in parties attempting to shift as much risk as possible to the other side. Deal mediators facilitate a more rational distribution of risks, preventing the mistrust and resentment that can derail business relationships.

Value Creation: Perhaps most importantly, deal mediators help expand the “Zone of Possible Agreement” (ZOPA) through integrative negotiation techniques. Rather than simply dividing existing value, they help parties identify opportunities to create additional value through creative problem-solving, trade-offs, contingencies, and prioritization of interests.

• Conflict Preemption and Dispute Avoidance –

In the Indian business context, there exists a cultural reluctance to thoroughly discuss potential conflicts at the outset of business relationships. Many consider such discussions inauspicious or pessimistic—implying a lack of trust or good faith. This cultural tendency to proceed under the optimistic assumption that “nothing will go wrong” often leaves businesses vulnerable when inevitable disagreements arise.

Conflict preemption represents a proactive approach that identifies and addresses potential areas of disagreement before they escalate into full-blown disputes. Unlike traditional dispute resolution that reacts to existing conflicts, conflict preemption works preventively by:

1. Conducting relationship risk assessments before finalizing agreements
2. Designing clear, comprehensive contractual frameworks that anticipate contingencies
3. Establishing communication protocols and escalation procedures
4. Implementing periodic relationship reviews to identify emerging friction points

Dispute avoidance complements this approach through structured early intervention mechanisms like:

• Joint problem-solving workshops
• Contractually mandated executive negotiations before formal dispute processes
• Appointment of standing neutral advisors or dispute review boards
• Implementation of early warning systems to flag potential issues

Together, these approaches represent not merely techniques but a philosophical shift—moving from the reactive cultural norm of “we’ll address problems when they arise” to a proactive stance of “we’ll design our relationship to minimize conflicts from the outset.

Med-Arb: Combining Flexibility with Finality

Med-Arb (Mediation-Arbitration) represents a sequential hybrid process that combines the cooperative nature of mediation with the decisiveness of arbitration. In this process, parties first attempt to resolve their dispute through mediation. If mediation fails to resolve all issues, the unresolved matters proceed to binding arbitration. The same neutral third party can serve in both roles, or different individuals may be appointed.

Med-Arb provides strategic business benefits including the opportunity for relationship-preserving solutions through mediation, guaranteed resolution through the binding arbitration component, time and cost efficiency by streamlining the transition between processes, and allowing parties to exercise control over outcomes before deferring to a binding decision. While not explicitly codified, the Indian legal system supports Med-Arb through the Arbitration and Conciliation Act’s flexible framework allowing party autonomy, the Mediation Act, 2023’s provisions that complement arbitration proceedings, and judicial endorsement in cases like Afcons Infrastructure v. Cherian Varkey Construction where the Supreme Court acknowledged the value of hybrid processes.

Arb-Med: Strategic Reversal for Enhanced Settlement

Arb-Med reverses the sequential approach, beginning with arbitration before transitioning to mediation. In this procedural framework, the arbitration phase proceeds until the arbitrator drafts an award but doesn’t disclose it. The sealed award serves as motivation for parties to engage seriously in mediation. If mediation succeeds, the award remains sealed; if it fails, the award is revealed and becomes binding.

This approach creates powerful incentives for good-faith participation in mediation, provides psychological closure by completing the arbitration process, offers a “safety net” through the sealed award if mediation fails, and enables more focused mediation discussions with full understanding of the dispute. Implementation considerations include careful separation of roles if the same neutral serves in both capacities, necessitating confidentiality protocols to prevent disclosure of the sealed award, and benefits from institutional support to safeguard the procedural integrity.

While not explicitly regulated in India, Arb-Med is compatible with Section 30(1) of the Arbitration and Conciliation Act, which allows arbitrators to encourage settlement, Order XXIII Rule 3 of the Civil Procedure Code, which recognizes and enforces settlements, and the broader judicial policy favoring consensual dispute resolution mechanisms.

Conclusion: In today’s complex global business environment, Alternative Dispute Resolution (ADR) has emerged as not merely an option but a strategic necessity for forward-thinking organizations. Moving beyond traditional litigation’s financial burdens and relationship-damaging consequences, ADR—particularly innovative approaches like deal mediation—transforms conflict management from reactive defense to proactive strategy. The benefits extend far beyond cost savings to include relationship preservation, confidentiality protection, and customized solutions that truly serve business interests. Deal mediation exemplifies this evolution by preventing disputes before they arise, creating optimal agreements with rational risk allocation, and establishing stronger foundations for sustainable business relationships. As international commerce accelerates and regulatory environments grow more complex, organizations that embed ADR principles into their strategic planning will find themselves better positioned to navigate uncertainty, manage relationships effectively, and transform potential conflicts into opportunities for innovation and growth in an increasingly interconnected business landsca

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[1] Desai M, Nish Shetty Vyapak Desai, Adrian, et al. MCIA ANNUAL REPORT.; 2024.

[2] National Judicial Data Grid, accessed [8^th April, 2025], https://njdg.ecourts.gov.in/njdg_v3//?p=home/index&state_code=&dist_code=&app_token=a566bddc8ad53a33f9b3d44ed2288af6bf9eb64a19ac8c6e4acdb0f99f0d300f

[3] Section 29A, The Arbitration and Conciliation Act, 1996

[4] Desai M, Nish Shetty Vyapak Desai, Adrian, et al. MCIA ANNUAL REPORT.; 2024

[5] Singh R. Indian corporate legal expenditure surge 17% to Rs 52,568 crore in FY24. www.business-standard.com. https://www.business-standard.com/industry/news/indian-corporate-legal-expenditure-surge-17-to-rs-52-568-crore-in-fy24-124090500354_1.html. Published September 5, 2024.

[6] India Legal. Litigation expenses: high cost of justice. India Legal. https://indialegallive.com/special-story/litigation-expenses-the-long-quest-and-high-cost-of-justice/. Published December 4, 2017.

[7]  (2010) 8 SCC 24

[8] Vikram Bakshi v. Sonia Khosla, (2014) 15 SCC 80, para 15

[9] Government initiatives in the realm of Alternative Dispute Resolution mechanisms. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2084219.

[10]Government of India at forefront to promote Alternative Dispute Resolution Systems. https://pib.gov.in/PressReleasePage.aspx?PRID=2003844.

[11] Balachandran V. Mediation Act and Rules: Understanding Finer Nuances.; 2024.

[12] Deal Mediation: The Future of Alternative Dispute Resolution. https://im-campus.com/wp-content/uploads/2021/03/Deal-Mediation-final-EN.pdf.