ADR and Personal Injury Compensation

Prof Krishna Deva Rao

Adversary system of justice produced a lot of hardship and injustice to the poor and disadvantaged sections of society. Although the debate about Alternative Dispute Resolution (ADR) methods has recently intensified, the idea of alternatives to litigation is neither novel nor of recent origin. We had an informal and indigenous form of lay adjudication called Nyaya Panchayat where there was informal hearing, no legal representation, examination of witnesses, judgement pronounced in open court.

If we look back to the progress of the Indian Legal System in the last five decades, the law, as a resource was not equitably distributed, the poor and the disadvantaged were denied access to justice. We have mystified the law, procedure, knowledge and know-how of the law was codified only to benefit the rich and the privileged sections. The core function of the court as a public institution is to serve the needs of the litigants and thereby maintain public confidence in justice dispensation system. The courts also have the responsibility to use ADR when it can help to save the litigant and public resources while preserving fair procedures and outcomes.

Non Litigative Techniques of dispute resolution

ADR has emerged in India in the middle of nineties as response to inordinate delay in disposal of cases resulting in docket explosion. The privatisation and structural adjustment policies have forced the Indian legal system to rethink and find out ways and means to explore quick, inexpensive ways to resolve cases without every case needing to go through a full court process. The most commonly known methods of ADR are negotiation, mediation, conciliation and arbitration. These methods have been very widely used not just in big, complicated commercial cases but in a number of other non-commercial, everyday from of disputes. ADR methods are the non-litigative dispute resolution strategies for resolving dispute outside the usual court process.

When a conflict becomes a dispute it enters in to the courts rooms for adjudication. Some disputes may be resolved by adjudication. Some disputes may be resolved by negotiation without any need for third party assistance. In some cases, assistance of third party could facilitate expedite resolution.

Negotiation is the most commonly used method of resolving conflicts. It is a voluntary non-binding process in which parties control the outcome as well as the procedures. It's a less complicated, inexpensive and speedy method of dispute resolution. Most of us negotiate in every day form of life without realising it.

Mediation is a structure negotiation process. A neutral third party, the mediator assists the parties to agree on their own solutions to the disputes. The third party perhaps in some cases help in evaluation of issues, explore interests, concerns and options of parties. The mediator has to deal effectively with emotional and hidden factors and assist the parties towards resolution of disputes.

Conciliation is a process similar to mediation but often is not a voluntary process. Conciliation is the willingness of the both parties to resolve differences. The parties to the dispute present their case to a neutral 'judge' who is the conciliator and assists in settlement. The arbitration and Conciliation Act 1996 provides the details of procedure and process of conciliation. The parties with the help of a conciliator arrive at a settlement, which shall be signed by both parties, which will be final and binding upon them. This agreement will be authenticated by the conciliator and will have the same status and effect as an arbitral award.

Any dispute can be settled by conciliation where parties agrees to seek an amicable settlement. Conciliation is a system where disputes are settled not by means of a formal court decision but by mutual concession of the parties through good offices of conciliator or judge.

Law relating to Personal Injury Compensation

Personal Injury claims fall broadly under four specific categories of disputes. The disputes over personal injuries include death or injuries on road at work place, deaths due to medical negligence and issues arising out of tortious liability.

For instance, if a person frequently plays music loudly and the neighbor gets disturbed leading to indignation and defiance, that incompatibility of interest would result in dispute. Negotiation or a form of third party intervention is an appropriate method to resolve it. In this case, the difference of opinion as to a legal right either to play the music or to be protected from nuisance then that will be justiciable dispute.

The majority of disputes comes under the injury or death due to accident arising out of motor vehicle. The motor vehicle Act 1988 made insurance of motor vehicles as compulsory. The owner of every motor vehicle is bound to insure the vehicle against the third parties risk. If the vehicle is insured against the third party risk, the injured party can claim compensation from the insurance company.

Insurance policy is a personal contract between the parties for indemnifying the insured in case of an accident covered under the policy. If a vehicle is not insured against third party risk, the claimant still has a right to claim compensation from the owner of the vehicle under the principle of vicarious liability.

The judiciary in India has followed liberal approach in case of any questions relating to breach of insurance policy. In Nagaraju v Oriental Insurance Company (1996) 4 SCC 647, the Supreme Court while uphelding the case of Skandia Insurance Co. Ltd. v KOKILABEN, (1987) 2 SCC 654 observed that "The exclusion term of insurance policy must be read down so as to serve the main purpose of the policy that is to indemnify the damaged caused to the vehicle. In this case, the appellant was owner of the insured truck which was covered by a comprehensive insurance policy issued by Oriental Insurance Company covering risk to the limit above two lakhs. The truck sustained major damage in an accident with a gas tanker the repairs of which amounted to Rs. 8,7000/-. At the time of the accident the truck was carrying nine persons while the policy did not cover use for carrying passengers in the vehicle except employees not exceeding 6 in number. The Supreme Court observed that the presence of nine persons had not contributed in any manner to the cause of accident and also the claim did not relate any injuries to those nine persons. The claim is primarily for damage caused to be insured vehicle, which not have been denied in the present case.

Consensual adjudication

If litigation is pending in the court and parties are making efforts to use ADR methods to resolve the disputes parallel to the court proceedings and the parties may record any settlement agreement reached by ADR as an award or order in those court proceedings. This settlement order could be recorded by consent as an order of the court. The experience in England and Wales is the parties could record the terms of their agreement and have it made an order staying the proceedings and reserving the right to revert to the court in relation to any questions arising in the course of implementation.

Even if no proceedings are pending in court, it may in some circumstances possible for parties in case of settlement negotiations to initiate proceedings so that their agreement can be made an order of the court by consent.

Even in case of personal injury claims a claimant who is about to institute court proceedings defer doing so pending negotiation /mediation and could approach the court to record the consent order. A mediated settlement agreement can be referred as a judgement, which is nothing but a "consensual judgement". This could enhance the ADR process in cases where enforceable orders were needed.

The Civil Procedure Code in its order 32A casts the duty upon the courts to make efforts for settlements in family matters and order 27 Rule 5B emphasis on suits against Government and Public Offices.

In 1984 the Himachal Pradesh High Court ahs taken an initiative to set up conciliation court in Shimla. The sub judge at the District Court examines case files pending in the court and refers the oldest cases of specified categories to the district judge for conciliation. The conciliation court would settle the issue. The district judge will consult the concerned legal counsel in that case and if both parties are willing to settle the case and abide by it with a view to fore close future litigation.

The Law Commission of India in its 77th report in 1978 suggested to set up conciliation boards in case of petty suits where the value of the suit is around Rs. 5000/-. The parties before filing a suit for recovery of money for the above amount should first approach conciliation boards and if it is not settled amicable within 3 months, then they should resort to litigation.

In case of motor vehicle accidents, the court sends the cases to concerned insurance companies for comments. The insurance company studies claims and intimate motor vehicle tribunal through their counsel the amount offered. The motor vehicle tribunal hears both parties and would try to bring out an amicable settlement.

It would be interesting to look at the recent decision of Supreme Court of India as regards to the interpretation of consensual adjudication.


 Skypark Couriers v Tata Chemicals, II (2000) CPJ 6(SC)

The practice of consensual adjudication and its application to consumer disputes have come before the Supreme Court in this case. Supreme Court is not ready to accept the practice of consensual adjudication.

In this case, the National Consumer Disputes Redressal Commission has referred the present dispute to Justice V.C. Tulza Purkar, retired Judge of Supreme Court of India when both sides agreed for consensual adjudication. The records of the case were transmitted to him with a direction that the award will be sent to the commission after the arbitration proceedings are completed so that final orders can be passed by the Commission in accordance with the award. The Commission has given three months to complete the award

The important questions raised in this case is can a court, commission, tribunal is authorised to refer disputes for a consensual adjudication? It is abdication f its legal responsibility? And can the court/commission tribunal base their order / judgement on the basis of the award?

The Supreme Court held that the Commission under the Consumer protection Act do not have the jurisdiction to refer the dispute for a consensual adjudication and then make the said decision an order of the commission. Even if there exists an Arbitration clause in an agreement and a complaint is made by the consumer in relation deficiency of services, then the existence of an arbitration clause will be not be a bar to the entertainment of the complaint by the commission. Supreme Court stated that it is an "unhealthy practice for courts/commission to abdicate their duties and functions and to delegate adjudication of disputes before them to third parties".


Lok Adalat

Lok Adalat is another strategy for early resolution of disputes particularly in personal injury compensation. One of the strategic legal aid programme was provided in 1980s by the committee for implementation of legal aid schemes (CILAS) is holding of Lok adalats for settlement disputes through conciliation. A voluntary effort for amicable settlement of disputes is made by lok adalat. It has become popular for pre-litigation settlements and decisions of lok adalat became enforceable after endorsement by concerned courts.

Lok Adalat is a forum for dispensation of speedy alternative dispute resolution method. This forum is a not a new system but an age-old system when village elders used to settle the disputes amicably. Lok Adalat institution ahs received statutory backing from the Legal Services Authories Act 1987 and any award given by it has a force of decree in itself. No appeal can be entertained against the order of Lok Adalat. Lok Adalat settles largest number of cases relating to personal injuries compensation claims.

Manju Gupta v National Insurance Company, 1994 ACJ 1036

This case demonstrates the sad state of compromises and settlements in Lok Adalats denying the fair minimum claims of the petitioners. The Motor Vehicle Act emphasis on speedy resolution of the claim but due to inordinate delay the claimants settle at the lowest compensation with the insurance companies.

In this case, Manju Gupta of 3 years old lost her two legs in the motor accident. A claim petition was filed for Rs. 2.21 Lakhs. During the pendency of the disputes the Lok Adalat was held at this place. The father of the claimant settled the case at Lok Adalat for Rs. 30,000/- and the insurance company immediately paid the money and filed the settlement petition at Motor Vehicle Accidents Claims Tribunal.

This issue has been reported in the local new paper. The High Court of Allahabad had taken suo-moto note of the issue and directed the Tribunal to send the records to the High Court. The High Court awarded Rs. 1,10,000/- as compensation. The High Court also observed that according to order 32 Rule 6 & 7 a claim petition can not be referred to Lok Adalat without Tribunals permission. In this case, no permission was taken from the claims tribunal. But the preceding officer of the tribunal was chairing the Lok Adalat at that time.

In the name of the speedy resolution of the disputes the fair interests of the parties can not be sacrificed. More importantly when the petitioners are minors, insane and disabled, the court has to give proper importance in deciding the claims.


In personal injury claims the plaintiff is required to pay court fee. This creates hardship for the victims or dependants. The Madhya Pradesh Government issued ordinance-exempting victims from payment of court fee after math of Bhopal tragedy. In all personal injury compensation cases, the victim, dependants or claimants should be exempted from payment of court fee. The court fee may be recovered after award of damages.

The victims in personal injury cases are facing serious disadvantage and economic blackmail resulting from delayed decision on the dispute, which results in settling the dispute on unjust terms. The payment of interim relief alleviates financial hardship of victims. It improves the plaintiffs bargaining power, as they need not settle for inadequate sum just to satisfy immediate economic needs.

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