Why India should encourage Online Dispute Resolution

The concept of online dispute resolution has emerged as a beacon of hope, harnessing artificial intelligence and digital platforms to expedite resolution processes.

In an era focused on technological efficiency, the Indian judiciary faces a colossal backlog of over 4.5 crore pending cases, impeding swift justice. To tackle this challenge, alternate dispute resolution (ADR) mechanisms have evolved over time, offering arbitration, mediation and conciliation as alternatives to court-based resolutions. The concept of online dispute resolution (ODR) has emerged as a beacon of hope, harnessing artificial intelligence and digital platforms to expedite resolution processes. Regulatory bodies such as the Reserve Bank of India, the Securities and Exchange Board of India, and the Insurance Regulatory and Development Authority of India have taken note of ODR's potential and have begun integrating it within their sectors. This article delves into the dynamics of court-based dispute resolution, the essence of ADR and ODR, and how ODR's economics stands to transform the landscape.

Effective Solution

Conventional court-based dispute resolution often results in lengthy procedures, high costs and uncertainty. According to the Access to Justice survey, litigants bear expenses of around Rs 497 per day and lose Rs 844 in business revenue per court day in a civil matter. To mitigate these issues, Chief Justices of India like NV Ramana (retired) and DY Chandrachud have consistently underscored ADR mechanisms for their efficiency.

ADR stands as a cost-efficient and confidential means of resolving disputes. Its flexibility is offered through ad-hoc and institutional mechanisms. Mediation and conciliation, in particular, present negligible costs in comparison to prolonged litigation. The Delhi High Court's mediation drive, which successfully disposed of 75.3 percent of referred cases, showcases ADR's potential to reduce court burdens and enhance access to justice.

ODR capitalises on technological integration and artificial intelligence. With increasing disputes in online transactions, ODR serves as an effective solution, transcending geographical barriers. ODR's economic advantages stem from its online nature, sparing litigants from court fees, travel, and documentation expenses.

Economically Viable Substitute

The concept of ODR introduces a significant economic paradigm shift, fundamentally reshaping conventional legal proceedings. By seamlessly integrating artificial intelligence, machine learning and technology into the legal domain, ODR has emerged as a practical, time-conscious and economically viable substitute for traditional litigation. This transformation gains further traction due to the legal validation of e-commerce and e-governance in India, underscoring ODR's pertinence. Particularly noteworthy is its relevance in addressing disputes arising from online transactions, where parties are geographically dispersed.

Renowned former Supreme Court Justice BN Srikrishna underscores ODR's complementary role within the judicial framework, averting unnecessary legal entanglements and ensuring direct dispensation of justice to litigants. Amitabh Kant, representing the G20 office, accentuates the potential of a robust ODR ecosystem to amplify justice accessibility and business facilitation. He envisions ODR as a catalyst for cost-efficient, expeditious and equally credible dispute resolution. Nandan Nilekani, the co-founder of Infosys, illuminates India's ODR journey, detailing the resolution of 16 million disputes through NITI Ayog's initiative-backed ODR systems.

The economic rationale behind ODR becomes evident in its ability to minimise expenditures associated with court fees, documentation, travel and more. NITI Aayog's projection of ODR's GDP contribution, around Rs 1.99 lakh crore, underscores the fiscal advantage by mitigating court-related costs and business interruptions. Empirical data highlights ODR's efficiency, with an average case resolution duration of 44 days, a stark contrast to traditional litigation's 277 days.

India's judiciary grapples with an overwhelming caseload, with judges handling far more cases than their US counterparts. Embracing ODR stands as a strategic antidote, relieving this judicial burden, expediting dispute resolution and enhancing justice accessibility. ODR's adoption introduces a technology-centric approach to conflict resolution, potentially reshaping India's legal landscape, enhancing efficiency, and fostering a more streamlined, accessible legal system.

Lowers Financial Burden

In the landscape of legal technology, the potential of ODR to revolutionise the way justice is delivered cannot be underestimated. ODR holds the promise of rendering justice convenient, swift, accessible and affordable — an embodiment of the core constitutional principle of the 'right to life' as enshrined in Article 21 of India's Constitution. Research underscores how ODR mechanisms can substantially reduce the financial burdens associated with traditional litigation, making it a beacon of modern innovation within the legal tech industry.

However, the journey toward fully harnessing ODR's potential is still unfolding, aligning with the vision of NITI Aayog. Realising this vision necessitates a collective effort among stakeholders to grasp the value proposition of ODR. The government and courts must proactively restructure the legal framework to accommodate and integrate this method. ODR can play a pivotal role in the realisation of grievance redressal mechanisms, as exemplified by the Consumer Protection (E-Commerce) Rules, 2020. E-commerce enterprises, guided by these rules, can bolster consumer trust by adopting ODR, streamlining dispute resolution and enhancing satisfaction.

Moreover, the adoption of ODR by micro, small and medium-sized enterprises (MSMEs) could mitigate the precarious challenge of invoice recovery, thereby preventing insolvency threats. Financial institutions, too, can expedite loan recovery using ODR tools, echoing the recent call from the RBI governor to prioritise higher recovery rates. With the colossal amount of loans written off, ODR offers a pathway to reshape the commercial transaction landscape. By embracing a widescale implementation, India stands poised not only to champion UPI but also to serve as a global paradigm for successful ODR adoption.

— Kshitija Baitalwar, Manager-Partnerships at WeVaad also contributed to this article.

Navneet Sharma is Director General, CUTS Institute for Regulation and Competition (CIRC). Kritika Sethi is Co-founder of WeVaad. Views are personal, and do not represent the stand of this publication.