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ODR Beginning to Find Takers in India

New article in India’s Economic Times on ODR:

In India, where courts are overburdened and the backlog of cases runs into lakhs, the argument for online dispute resolution is strong.

With more than 75,000 tenants using home rental startup NestAway, disputes arising out of their refusal to pay rents or bills is not uncommon.

Because of the small sums involved, the disputes are usually resolved out of court through arbitration, based on a clause present in the rental contracts. But with arbitration still a cumbersome and costly process mandating both parties to be present for hearings and involving the submission of many documents, NestAway began looking at how tech can be used to speed up resolution and also reduce the cost.

Starting with trying to resolve disputes via email, it went on to incubate an online dispute resolution (ODR) platform — Cadre or Centre for Alternate Dispute Resolution Excellence. On Cadre, founded by Shalini Saxena and Kanchan Gupta, the resolution is done online through a website-based platform.

First, one party approaches the platform, which contacts the other party. If both parties agree to the arbitration rules, an arbiter is appointed and time-stamped intimations are sent on emails and WhatsApp and SMS. The parties do not meet face to face but communicate electronically, including via video calls. The decision, which is legally binding, typically comes in 20-25 days.

At Cadre, the arbitrator’s fee is levied on both parties, but is usually paid by the party that brought up the dispute. “Legal costs for resolving such disputes have halved. Also, a case that would take six months via arbitration is being settled in 30 days,” says Rajneesh Jaswal, general counsel at NestAway.

Though these are early days for ODR with about 30 cases resolved via Cadre so far, Jaswal is hopeful the numbers will rise. Cadre is not the only platform in India to foray into ODR. Sama, a startup by Pranjal Sinha, Akshetha Ashok and Vikram Kumar, is running a pilot for ICICI Bank. It is helping resolve nearly 10,000 disputes with values of up to Rs 20 lakh after winning an E-Alternate Dispute Resolution Challenge 2019 launched by the bank and Agami, a non-profit. Sama charges a commission for the services provided on its platform.

Last year, Vikas Mahendra, a partner with law firm Keystone Partners, cofounded the Centre for Online Dispute Resolution (CODR), which positions itself as an institution that will administer cases online end-to-end. It is currently focusing on arbitration training to build a talent pool and is looking to start resolving disputes by January end.

These are the early signs of the adoption of an alternative dispute resolution mechanism being widely used in China and the US, particularly in cases related to online transactions.

In India, where courts are overburdened and the backlog of cases runs into lakhs, the argument for online dispute resolution is strong. “Access to justice in India is abysmal and resolving disputes is evidently a pain point, considering the time, money and effort involved,” says Pranjal Sinha of Sama.

While arbitration was intended as an alternative to going to court for certain kinds of disputes, that mechanism itself has become cumbersome and often expensive.

ODR offers a more accessible, transparent and faster option, particularly for companies dealing with high volume and low value transactions done online. With more Indians transacting online — whether for e-commerce or banking — stakeholders say the timing is right for ODR to gain acceptance as an easy mechanism to resolve grievances. A year ago, a Nandan Nilekani -led panel on digital payments suggested that all payment system operators “must implement a fast and fair online dispute resolution system”.

Globally, ODR growth was fuelled by the e-commerce boom, with eBay and PayPal resolving millions of disputes online. “ODR can be used across sectors — from insurance to banking – and also for family disputes. It is about leveraging tech to prevent and resolve disputes,” says Chittu Nagarajan, a pioneer in ODR who headed Community Court initiatives at eBay and PayPal.

After the acquisition of her last ODR firm Modria by Tyler Technologies, Nagarajan in 2019 launched CREK ODR, an industry- and dispute-agnostic platform, which can be accessed by clients anywhere in the world. She underlines the need for a strong technology layer while implementing ODR. Her startup is an end-to-end SaaS platform with multiple features like virtual mediation rooms. “ODR is not just about applications. You need a fantastic tech platform. The design can’t be the same for platforms resolving family and e-commerce disputes.”

Players are aware of the challenges in the adoption of ODR in India — from the lack of enough arbitrators to building trust among consumers. “People need to accept that disputes can be resolved without the parties seeing each other,” says Jaswal. “The bigger test will be dealing with people who are not used to the digital ecosystem.”

Sama’s Sinha says capacity building is also a concern. “Lawyers can now explore providing online arbitration and mediation services as a viable career option too.”

Nevertheless, there is growing conviction that it is only a matter of time before ODR is adopted at scale in India. CODR’s Mahendra points to two recent judgements. In the first case, the Bombay High Court pulled up Tata Capital Financial Services when it was found to have used the same arbitrator for over 2,200 cases, paying him Rs 1,000 per case, which highlights the need for a large number of arbitrators at acceptable price points.

In the second, the Supreme Court ruled that even in contracts with unilateral arbitrator appointment clauses, a person with an interest in a dispute must not be eligible to appoint an arbitrator. This ruling affects millions of contracts that have already been signed and forces organisations to look for independent appointing authorities for their contracts. “ODR and technological assistance are the only affordable solutions to this need for large-scale arbitration,” says Mahendra.


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