According to a Business Recorder report, in the works is a legislative framework for ADR that is to provide small and medium enterprises opportunity for out-of-court settlement of commercial disputes. It may be recalled that the Central Board of Revenue (CBR) has already tried and tested the idea, and found it to be extremely effective.
It set up alternative dispute resolution committees last year to settle altercations regarding customs and sales tax, and, soon enough, saw the measure result in the reduction of the 'first appeal' cases to almost half. In July 2004, for example, as many as 56,000 'first appeal' cases involving Rs 36 billion were pending in various courts.
By February 2005, that number had come down to 28,000. In the process not only the parties engaged in the litigation process saved their time and energy, the CBR was able to recover a handsome amount of revenue whereas previously its recovery rate was not more than five percent. Encouraged by the success of it ADR committees, it expects to settle all the pending cases by the end of the current year.
ADR can prove to be an equally effective and expeditious means of settling commercial squabbles for small and medium enterprises. As it is, our justice system is notoriously slow and expensive. It can take as long as 12 years for a case to even come up for proper hearing, at the culmination of which a small player may be left holding the short end of the stick. Which is frustrating enough for any litigant.
For a small or a medium sized commercial concern struggling to stay afloat, that may become an issue of survival. At the least, our protracted and costly litigation process can hamper the ability of such enterprises to function. Indeed, the Arbitration Act and the institution of Ombudsman are there to resolve disputes, but not on a sufficient level. The facility of arbitration courts has its own value.
Nonetheless, it works better for the corporate sector than for the smaller companies. So far as the institution of Ombudsman is concerned it does have an important role to play as an alternative dispute resolution forum. The problem is that it has a limited jurisdiction.
It steps in to resolve commercial disputes only when they are related to maladministration on the part of a government department. Hence there is an urgent and strong need for an ARD mechanism which allows for out-of-court settlement of cases involving commercial altercations.
The pilot project the government has decided to set up for the purpose is a good step in the right direction, but it must soon become a regular feature of the commercial disputes resolution system.