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Time to recognise Adjudication as an ADR Mechanism in India

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Arbitration, mediation, conciliation, and litigation are all options for resolving a dispute when it arises. Alternatively, a third-party adjudicator can assess each side’s case and render a binding decision. Adjudication is a preferred method of dispute resolution in construction projects because of the relative speed and cost savings that can be realised when compared to other methods of dispute resolution, as well as the fact that adjudicators typically have firsthand knowledge of the construction industry. Some examples of these professionals include quantity surveyors, architects and lawyers with expertise in construction sector.

However, the concept of ‘Adjudication’ as an ADR mechanism has not yet been recognised by India. Still we are regularly encountering a similar problem with many Construction Contract Agreements, which refers the dispute to Adjudicator before invoking Arbitration in that case, if the other doesn’t invokes Arbitration within the stipulated time period, the decision of Adjudicator becomes final and binding.

Here’s one of the standard clause below for your better understanding:

1.6       Settlement of Disputes 

1.6.1    Adjudicator

                        (1) xxx

                        (2) xxx

(3) The Adjudicator shall give its decision in writing to both Parties no later than 28 days after the referral of a dispute. If the Adjudicator has rendered its decision within the 28 days time limit, and no notice of intention to commence arbitration has been given by either the Owner or the Operator prior to the expiration of 60 days after the reference of the dispute to the Adjudicator, the Adjudicator’s decision shall become final and binding upon the Owner and the Operator. Any decision that has become final and binding shall be implemented by the Parties forthwith

In such scenario when the opposing party chooses not to invoke arbitration within the specified time-frame in the agreement the decision of the Adjudicator becomes final and binding. “How to enforce the decision of an Adjudicator?” is indeed a substantial problem.

Adjudicator decisions cannot be enforced in India presently because there is no enforcement mechanism in place. Indeed, the aggrieved party has a right but no remedy. In various decisions, the Supreme Court of India has said that “no party could be left remediless.”   However, such aggrieved parties in these dispute have no recourse, and it is high time for India to acknowledge the concept of Adjudication as an alternative dispute resolution mechanism.

Case Study of United Kingdom

This was the first case which raised the same issue before the High Court of Justice, Queen’s Bench Division Technology and Construction Court in the matter of Macob Civil Engineering Ltd v. Morrison Construction Ltd [1999] EWHC Technology 254 (12th February, 1999). In this case the provisions of UK’s Arbitration Act’s provisions were taken into account. For a retail development in Wales, Macob, a groundwork contractor, signed a contract with Morrison to complete the groundwork. When conflicts occurred over an interim payment request, Macob referred the matter to adjudication. Morrison must pay Macob £302,366.34 plus VAT, interest, and the adjudicator’s fees, according to the adjudicator. Morrison refused to abide by this decision, therefore Macob sought an injunction to compel him to do so. As they were arguing against the adjudicator’s decision, they argued that the contract had a legitimate arbitration clause, and thus the decision of adjudicator cannot be enforced. First, the judge ruled that even if the legitimacy of a decision is being disputed, it is still a decision that can be enforced under the Act. Regarding the arbitration clause, the judge refused to accept that the adjudicator’s ruling should not be enforced simply because the issue was subject to a separate reference to arbitration. Therefore, the judge issued a ruling in Macob’s favour.

Further, Justice Dyson explained the scheme provided by Section 108 of the Housing Grants, Construction, and Regeneration Act 1996:

‘The objective of Parliament was clear in enacting the Act. Adjudicators’ interim rulings would be enforced awaiting arbitration, litigation, or an agreement; see Section 108(3) and paragraph 23(2) of Part 1 of the Scheme. The adjudication schedule is extremely constrained. Many people believe that the rules are too strict, and that this could lead to unfairness. This must have been on Parliament’s sights. In terms of procedure, the adjudicator has a lot of leeway.

Although it is correct that he is obliged to act objectively, it is not shocking that he is expected to do so. However, allow him to take the lead in determining the facts and the law. As a result, he has the option of conducting an inquisitorial investigation or, as in this instance, inviting the parties to present their arguments.

Those familiar with the tedious details of the old method of resolving construction disputes may find it difficult to understand Parliament’s intention for adjudication to be conducted in this manner. Arbitration and litigation in construction disputes, nevertheless, remain unabated by the legislature. It has only served as an interim step in the process of resolving a dispute. Importantly, it has said that adjudicators’ findings are final and must be followed until a settlement is reached.[1]

 

Way Forward

Time has come for India to recognise Adjudication as an Alternative Dispute Resolution Mechanism to give remedy to these remediless parties of the contract by incorporating relevant provisions into the Civil Procedure Code, 1908 and the Arbitration & Conciliation Act, 1996 etc. to ensure that Adjudicators’ decisions are enforced and additional remedies are available in these circumstances. Although adjudication has numerous advantages over other dispute resolution mechanisms, probably the most important of these is its ability to expeditiously and effectively resolve any issue arising out of a contract. A 28-day adjudication process from the selection of the adjudicator to the final verdict saves both time and money because of the complexity of construction disputes and the time and money it takes to litigate those disputes.

By –

Vishal Kumar

Associate – Dispute Resolution

Legacy Law Offices, New Delhi

This article contains the Author’s own opinion and does not represent the opinion of Legacy Law Offices LLP. This article’s contents are provided solely for informative reasons and do not constitute legal advice. Readers are advised to consult legal counsel before acting on any of the information.

AUTHOR 

Vishal Kumar is commercial litigation and arbitration lawyer presently associated with Legacy Law Offices, New Delhi. He has earned his law degree from GGS Indraprastha University and a master’s degree in Corporate and Business Law from Amity University. International and domestic arbitrations, MSME disputes and commercial laws, white-collar crimes, insolvency & bankruptcy, and writs are among his areas of practice.

 

[1] Macob Civil Engineering Ltd v. Morrison Construction Ltd [1999] EWHC Technology 254 (12th February, 1999) URL: http://www.bailii.org/ew/cases/EWHC/TCC/1999/254.html Cite as: (1999) 15 Const LJ 300, (1999) 1 TCLR 113, (1999) 64 Con LR 1, [1999] CLC 739, [1999] EWHC 254 (TCC), [1999] 37 EG 173, [1999] BLR 93, [1999] 3 EGLR 7, [1999] EWHC Technology 254, 64 Con LR 1





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