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  • Writer's pictureNaxcent Consulting

Mediation Law in India: A transitioning position

I. Concept Of Mediation

Mediation, as a form of alternative dispute resolution, is a negotiation of a dispute between two parties with the help of a neutral third party, known as a mediator and is governed by the Alternate Dispute Resolution and Mediation Rules, 2003. The purpose of mediation is to facilitate a consensus between the litigants by exploring the underlying interests of both parties through joint and separate sessions. A mutually satisfactory settlement is then recorded as an enforceable contract.

There are several reasons why mediation is preferred to litigation. First, the procedure is non-binding and controlled by the parties, in that neither party can be forced to concede to an outcome that it does not agree with. Second, it is a confidential procedure, and a party cannot be compelled to disclose any information. Furthermore, any confidential information that is provided for the benefit of the parties cannot be revealed outside the context of the mediation. Third, mediation is a procedure based on the varying interests of the parties, and is not limited to applicable law, which allows them to identify issues and areas of compromise more freely, resulting in a settlement that is unique and creates more value for both parties, and often strengthens their relationship. The purport of mediation is most evident in cases where the relationship between parties has to be maintained, especially in long-term contracts and contracts of partnership.

The courts have time and again supported mediation and stated how people should shift towards mediation instead of turning towards traditional litigation. This is because mediation as a means of dispute resolution is cost-effective, time-saving, and convenient to parties as it does not harm the relationship between the parties after the end of the resolution process.

Mediation is relevant because it offers flexibility and control to the parties. Even if it fails, it allows the parties to assess and define the issues necessary in the preparation for subsequent arbitration or court proceedings.

II. Development Of Mediation In Indian Law

Mediation can be traced back to the adjudication powers impliedly vested with village panchayats in India. This was an informal method of dispute resolution, where respected village elders would settle disputes.

Provisions governing mediation are found across various statues. The first enactment was the Industrial Disputes Act, 1947 for the regulation of conciliation proceedings in industrial disputes. The Hindu Marriage Act, 1955 provides for reconciliation between parties.

The Legal Services Act, 1987 constituted the National Legal Services Authority for the settlement of disputes through negotiation, arbitration, and conciliation.

Section 89 of the Civil Procedure Code, 1908 was inserted by an amendment in 1999. Under this section, courts have the power to refer any matter to an alternate dispute resolution process – mediation, arbitration, conciliation, and judicial settlement – if it feels that there are elements of a settlement. Section 89 was added after the recommendations of the Law Commission of India in its 163rd report on “The Code of Civil Procedure (Amendment) Bill, 1997”. It was, hence, reinserted after it was repealed following the enactment of the Arbitration Act, 1940.

The Arbitration and Conciliation Act, 1996 was enacted to provide a framework for the resolution of disputes arising out of a legal relationship, whether contractual or not. These include commencement of conciliation proceedings, appointment of conciliators and assistance of suitable institution for the purpose of recommending the names or appointment of the conciliators and the role of conciliator in assisting the parties in negotiating settlement of disputes between the parties.

III. Landmark Cases

In Salem Advocate Bar Association v Union of India (2005), the Supreme Court recognized the importance, meaning and scope of mediation and upheld the constitutional validity of the new law reforms.

In Afcons Infrastructure Ltd. and Anr. V. Cherian Varkey Construction co. Pvt. Ltd. and Ors (2010), the Supreme Court set out the list of matters which were appropriate or inappropriate for mediation and came within the scope of reference under Section 89 of the Code of Civil Procedure, 1908.

In Bhavana Ramaprasad v. Yadunandan Parthasarathy (2014), the Karnataka High Court stated that there is no need for consent of parties to be taken by courts for referring the dispute to mediation. This raises the importance and need of mediation in the Indian scenario.

IV. Pre-Suit Institution Mediation under Commercial Courts Act, 2015

Under Section 12A of the Commercial Courts Act, 2015, and the subsequent Commercial Courts (Pre-institution Mediation and Settlement) Rules, 2018, disputes in commercial matters must have been subjected to mediation before an institution of the suit is allowed. The requirement of mandatory mediation can be circumvented by an application of urgent interim relief, and the institution of a suit can be allowed.

Furthermore, the enactment of mandatory mediation has several benefits also, namely:

  • By mandating mediation, neither of the parties appears weak to each other.

  • The myth of secondary justice being given by mediation is also resolved when the mandate is present.

  • Mandatory mediation helps the client economically.

  • The legal system’s burden is also alleviated by imposing mandatory mediation.

  • Furthermore, if the lawyers themselves understand the process of mediation, then the lawyers firstly suggest the process of mediation themselves to their clients, and secondly work in developing the mediation system themselves.

  • Lastly, mediation also helps in the creation of new employment opportunities.

V. Transitioning Scope of Mediation in India

The law governing mediation process has witnessed wide ranging transition in its very nature. One of the essential ingredients of mediation is that it is within the parties discretion as to whether they wish to adopt it. However, with the recent legal developments, this ingredient of independence is taken away from the process. A classic example of this transition is reflected in Section 12A of the Commercial Courts Act whereby mediation has become an essential procedural requirement.

This mandatory requirement has also garnered certain support in view of the argument that it would reduce the amount of legal costs that parties have to bear in litigation. However, there is no concrete data supporting this, and the contention is made on an assumption.

Opting for mediation is also indicative of the possible success of the process; the litigants show that they are willing to reach a compromise. However, when the process of mediation is imposed, or treated as a mandatory step or a mere compliance in the process of adjudication, mediation will not be fruitful, and will not produce efficacious results.

VI. Draft Mediation Bill

In order to provide weightage as well as to remove the inconsistencies between the various pieces of existing legislation such as Code of Civil Procedure 1908, the Industrial Disputes Act 1947, and the Commercial Courts Act 2015, time and again need was felt for bringing stand-alone law on mediation.

Unlike arbitration, India does not have a standardized and well formalized legislation on mediation. In an attempt to have a concrete legislation governing mediation as an effective ADR mechanism, The Ministry of Law and Justice on 5th November 2021, placed the Draft Mediation Bill, 2021 in the public domain to seek feedback and suggestions from all stakeholders.

Objectives of the Bill

1) The present Draft Mediation Bill 2021 is an umbrella legislation with the objective to promote, encourage and facilitate mediation especially institutional mediation for resolution of commercial disputes and otherwise.

2) The Bill takes into contemplation the international practice of using the terms ‘conciliation’ and ‘mediation’ interchangeably.

3) The Draft bill envisions to enforce domestic and international mediation settlement agreements, provide for a body for the registration of mediators, encourage community mediation and make online mediation an acceptable and cost-effective process.

4) To make online mediation as an acceptable and cost-effective process and for matters connected therewith or incidental thereto has been prepared.

5) Furthermore, it was essential to enact a law in mediation on issues of domestic and international mediation as India is a signatory to the Singapore Convention on Mediation

Main Features of the Bill

1) The draft Bill proposes to implement pre-litigation mediation: In a bid to reduce the case load for the courts, specifically commercial disputes, the Draft Bill under Section 6(1) requires that a party “shall”, before filing any suit or proceeding in any Court or Tribunal, take steps to settle the disputes by pre-litigation mediation in accordance with the provisions of the Draft Bill, and interestingly, the same can be carried out, “irrespective of the existence of any mediation agreement”.

2) The successful outcome of mediation in the form of a Mediation Settlement Agreement (MSA) has been made enforceable by law.

3) Availability of Interim Reliefs: Section 8 of the Bill provides power to the parties to approach a competent court or tribunal for seeking urgent interim relief. This would prevent irreparable injuries to the parties and secure their interests.

4) List of Disputes not fit for Mediation: The Bill provides a list of disputes that are not suited for mediation.

5) Time Limit for the Completion of Mediation Proceedings: Section 20 states a ninety day time-limit for the completion of the mediation process, from the date of commencement of the mediation. This limit can be extended with the consent of the parties for another ninety days. This ensures faster dispute resolution.

6) Mediation Council of India: The Bill provides for the establishment of the much needed Mediation Council of India which shall perform a number of functions, such as: frame regulations and guidelines for the conduct of mediation, frame policies and lay down norms, qualification and experience for accreditation of mediators, lay down by way of regulations standards for professional ethical conduct of mediators etc.

Analysis of Draft Mediation Bill

Whilst it is important to note that the bill is one which is extremely useful and is indeed a step in the right direction as far as the recognition and promotion of mediation is concerned, it also faces certain loopholes.

1) The Draft Bill does not provide any details pertaining to the qualifications of a trained mediator nor provides any reference of the 'capacity to mediate'.

2) Mandatory pre-litigation mediation mechanism would defeat the essence of mediation where the parties are unwilling to mediate.

3) The Draft Bill does not address as to what provisions would govern an international mediation that takes place in India but relates to non-commercial disputes that have arisen under a foreign law, such mediation not being covered by either Part I or Part III of the Draft Bill.

4) The Draft Bill provides that a domestic mediated settlement may be challenged on the ground of 'gross impropriety', without making any endeavour to define the term or specify its contours.

5) The consequences of non-registration of a Mediated Settlement Agreement have not been mentioned under the Draft Bill.

6) A number of provisions under the said Bill suffer from vagueness and require clarity. For example: Explanation 1 to sub-section (1) of Section 2 states that “if a party has more than one place of business, the place of business is that which has the closest relationship to the mediation agreement.” The said explanation has been loosely worded and is vague in nature and thus can give rise to multiple interpretations.

7) As far as subject-matter jurisdiction is concerned, Section 7 states that mediation shall not be conducted in relation to matters listed under Schedule II of the draft. However, it is pertinent to note that Schedule II is titled “disputes which may not be fit for resolution through mediation.” The use of two different phrases (shall and may) leads to different interpretations. Thus, harmonizing and using the same terminology for the said section and Schedule would lead to a lesser degree of confusion, and provide the much-needed clarity.

VII. Conclusion

Indian judiciary is already overburdened with a huge pile of cases and seeing the current trajectory, it would not be incorrect to state that few years down the line, this pile of cases would only increase. In addition, the rise in diverse areas of law such as energy, environmental, intellectual property require knowledge of that specific area and judiciary might not be able to comfortable accommodate and provide the same. Keeping in mind, the object and purpose of the judiciary, which is to deliver speedy and accessible justice to all, people should now switch to ADR which would help in achieve the above. Mediation, in particular stands out as it primarily focuses on the need and wishes of both parties. Overall, given the benefits of mediation, its frequent use will have a noteworthy impact on the judicial setup.

However, the imposition of mandatory mediation before the institution of suits goes against the very ethos on which mediation stands. Thus, an equilibrium has to be maintained between the promotion, imposition, and preservation of mediation.

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