Let’s talk mediation!

Posted On - 10 August, 2022 • By - Altamash Qureshi

The aim of a legal system in any society is the efficient settlement of disputes, be it through the courts of law, or an alternative dispute resolution (ADR) mechanism such as arbitration, mediation, conciliation, etc. These ADR mechanisms have been prevalent in India since ancient times and have assisted in the resolution of disputes relating to family, social groups, and also minor disputes relating to trade and property. Village-level institutions played the leading role, where disputes were resolved by a council of village elders, which was an informal way of ‘mediation’.

Though mediation has been prevalent in India since ancient times, it was given statutory recognition in 2002. Recently, several eminent jurists have proposed prescribing mediation as a mandatory first step for the resolution of certain classes of dispute. In the present article, we discuss mediation as a form of ADR.

Mediation in the Indian legal framework

Mediation as a mode of ADR is the process where parties are encouraged to communicate, negotiate, and settle their disputes with the assistance of a mediator. Mediation, like other ADR mechanisms, has its advantages in that it is flexible, confidential, cost-effective, and time efficient. The parties retain the right to decide whether to settle the dispute, the settlement terms, and to withdraw from the proceedings at any stage before termination. It is this wide array of features that makes mediation a preferred mode of dispute resolution.

Mediation has been given recognition under the Code of Civil Procedure,1908 – the procedural law related to the administration of civil proceedings in India. If it appears to a civil court that there exist elements of settlement that may be acceptable to parties, the court will formulate the terms of the settlement and after receiving observations on the said terms of settlement from the parties, refer the matter to mediation.

The Companies Act, 2013 also provides for mediation and conciliation as viable options for dispute resolution to which the concerned parties can resort to at any stage of the proceedings between them. An expert panel called as ‘Mediation and Conciliation Panel’ is required to be maintained by the Indian Government for conducting mediation between the parties in course of pendency of any proceedings before the Central Government or the National Company Law Tribunal or the National Company Law Appellate Tribunal. The intent of the legislature is to promote resolution of disputes pending before the civil court and companies’ courts through mediation and broaden the scope of mediation in India.

While the aforementioned mediation process can be initiated only once the parties have approached the courts, a need to initiate mediation without the intervention of the court was also felt, to enable parties to resolve their disputes without getting into bitterness of court litigation. Therefore, the concept of ‘Pre-Institution Mediation and Settlement’ was introduced in 2018 under the Commercial Courts Act, 2015, making it mandatory for parties to exhaust the remedy of pre-institution mediation under the Act before instituting a suit concerning any commercial disputes. This is a significant step that aims for settlement of the dispute between parties before a suit is filed. However, the rule need not be adhered to when an urgent interim relief is sought.

Mediation can especially benefit Micro, Small and Medium Enterprises (MSME). It is estimated that India has over sixty million MSMEs that contribute 28% to the gross domestic product. For facilitating the promotion and development of MSMEs, the government introduced the Micro, Small, and Medium Enterprises Development Act, 2006 (MSME Act). One of the fundamental goals of the MSME Act has been to shield the MSMEs from defaulting purchasers, who fail to make payments to these enterprises. Under the MSME Act, MSMEs can refer their dispute with the defaulting purchasers to the ‘Micro and Small Enterprises Facilitation Council’ for resolution of the dispute, initially by mediation and if that fails, then by arbitration.

While the legislations mentioned above deal with mediation conducted with the reference/ supervision/ monitoring of the court, there is no dedicated legal framework governing private mediation. Very often, private commercial mediation in India relies on the procedural framework of ‘conciliation’ under the Arbitration and Conciliation Act, 1996 (Arbitration Act). A settlement agreement arrived at through this mechanism is enforceable as an award under the Arbitration Act.

Proposed legal framework for Mediation

Since the laws on mediation are presently spread across various legislations, a need was felt for an umbrella legislation that specifically deals with mediation. In December 2021, a draft Mediation Bill, 2021 (Bill) (available here) was introduced in the parliament to promote mediation and to provide for enforcement of settlement agreements resulting from mediation. Some of its significant provisions have been highlighted below:
·  Mandatory pre-litigation mediation: The Bill mandates the parties to attend at least two mediation sessions. A cost may be imposed on them if they fail to attend the sessions without reasonable cause. The Bill also provides an all-encompassing definition of mediation, which includes pre-litigation mediation, online mediation, as well as conciliation.
·  Exceptional circumstances: The Bill also, under exceptional circumstances, allows the party to seek urgent interim relief from a court or tribunal having competent jurisdiction, before the commencement of mediation proceedings.
·   Timeline for mediation: The process of mediation is required to be completed within 180 days, which may be extended by another 180 days.
·   Disputes not fit for mediation: An indicative list of cases not fit for mediation has been provided in the first schedule of the Bill. These matters include disputes involving prosecution for criminal offences, disputes affecting the rights of third parties, disputes involving allegations of serious and specific fraud, fabrication of documents, forgery, impersonation, coercion, etc.
·  Settlement Agreement: The Bill introduces a ‘mediated settlement agreement’ (Settlement Agreement) resulting from mediation which settles some or all the disputes between the parties. The Settlement Agreement shall be final and binding once it is signed by the parties and authenticated by the mediator and will be enforceable.

On 13 July 2022, the Standing Committee on Personnel, Public Grievances, Law and Justice submitted its report (available here) on the Bill, recommending certain changes such as making mediation optional rather than mandatory, reducing the timeline to 90 days (further extendable by 60 days), making the proposed ‘Mediation Council of India’ as the sole authority to regulate all mediation service providers and institutes, etc.

The government’s attempt to have a standalone mediation law is positive because of the beneficial effect it will have in reducing the backlog of cases in the Indian judicial system. However, as recommended by the Standing Committee on Personnel, Public Grievances, Law and Justice, the Bill does pose some questions which ought to be addressed before it is enacted. In addition to ironing out the issues, the government would also have to take steps to promote mediation amongst the public at large, by creating general awareness.

Our thoughts

Internationally, India expressed its support for mediation when it became a signatory to the UN Convention on International Settlement Agreements Resulting from Mediation on 07 August 2018. Mediation in India also has judicial as well as legislative support. ​​Provisions have been specifically included to incentivize litigants to voluntarily choose this path. For instance, in addition to the various mediation friendly legislative provisions mentioned above, the Court Fees Act, 1870 also provides for the refund of the entire court fees if the matter is finally settled using the alternative dispute redressal mechanism.​​​​​​ Despite these developments, India still does not have a standalone law dedicated to mediation, and the scattered provisions across different legislations is not confidence inspiring to litigants. A standalone comprehensive legislation providing for an institutionalized framework for mediation may help gain more clarity and encourage parties to mediate. Introducing a codified law will also have beneficial effects in reducing the backlog of cases in the overburdened Indian courts.

To quote the Hon’ble Chief Justice of India, “To make the idea of access to justice effective, and user-centric, the need of the hour is the popularization of mediation, across various platforms.” 1 Mediation has significant potential not merely for reducing the burden of Indian courts, but more fundamentally for bringing about a qualitative change in the focus of the legal system from adjudication of disputes to settlement of disputes. The success of mediation will largely depend upon the evolution of an appropriate legal and regulatory framework, and also in creating awareness in society of the benefits of the mediation process.

Authors: Altamash Qureshi and Paridhi Rastogi

The information contained in this document is not legal advice or legal opinion. The contents recorded in the said document are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident, or any other cause.