Mediation in India

Introduction:

As per the latest statistics available on the National Judicial Data Grid, impending cases before the District & Taluka Courts[1] stand at over 40 million, the backlog waiting to be heard at various High Courts[2] is close to 5.9 million, and the pending case inventory before the Hon’ble Supreme Court of India[3] totals approximately 71,000.

Such backlog of cases, and the emergent need to unburden the judicial system, are central reasons for the Government and Courts to popularise Alternate Dispute Resolution Mechanisms (“ADR”) in India. Among the other available methods employed under ADR, one mechanism that stands out in terms of active participation of parties, in a non-adversarial backdrop, is Mediation.

Mediation is a method of resolving conflicts, where two or more parties arrive at a compromise with the support of a neutral party. A mediator is not a judge, rather a facilitator who assists parties in finding common ground.

An effective dispute resolution process not only has a significant impact on the economy and the method of doing business in the country, but also promotes ease of living for citizens, access to justice and rule law[4]. This coupled with the fact that India was one of the first prominent signatories to the Singapore Convention on Mediation (“SCM”) resulted in the promulgation of the draft of the Mediation Bill, 2021 (“Bill”), which emphasised on the need to further promote ADR, inter alia, by institutional mediation. The ADR mechanism of mediation though finds mention in various existing laws, no comprehensive law governing various aspects of mediation existed prior to this.

History of Mediation in India:

Much before the adoption of the formal British judicial system, the traditional Panchayat system prevailed in India whereby community issues were resolved by a group of village elders. Disputes were also referred to respected businessmen called Mahajans, to informally resolve the same amongst contesting parties.

The formal integration of mediation into the Indian legal system during the post-British era can be traced to the Industrial Disputes Act, 1947, wherein detailed procedures were prescribed for settling disputes out of court. Subsequently the enactment of the Legal Services Authority Act, 1987 provided for the establishment of Lok Adalats, which gave further impetus to the concept of mediation. Further, commercial mediation was given a statutory flavour through the introduction of Section 89 into the Code of Civil Procedure, 1908[5].

The enactment of the Commercial Courts Act, 2015[6], providing mandatory pre-institutional mediation in certain classes of Commercial Suits, where no urgent relief is sought, was also an important step in favour of commercial mediation. The Hon’ble Supreme Court has also recently held that this provision is not merely procedural, and must be complied with before any remedy can be availed under the said Act; and in the event of failure to invoke pre-institutional mediation, a commercial suit is liable to be dismissed[7].

The draft Mediation Bill, 2021

Introduction:

In order to further concretise a statutory framework for compulsory mediation in certain cases of civil and commercial disputes and strengthen the process of mediation in India, the Bill was placed before the Rajya Sabha (Upper House of Parliament) on  December 20, 2021 and referred to the Parliamentary Standing Committee on the same day. The Standing Committee submitted its report on July 13, 2022.

The Statement of Objects and Reasons of the Bill indicate that the Bill seeks to achieve, inter alia, the following objectives:

i. subsuming conciliation under Part III of the Arbitration and Conciliation Act, 1996, in mediation as per international practice of using the terms “conciliation” and “mediation” interchangeably.

ii. implementing compulsory pre-litigation mediation in certain classes of civil and commercial disputes before parties approach a court or tribunal.

iii. facilitating online mediation, the importance of which has increased manyfold in view of the Covid-19 pandemic.

iv. prescribing a fixed timeline of 180 days for completing a mediation, further extendable by another 180 days.

v. establishment of Mediation Councils, inter alia, to promote mediation and to develop India as a robust centre for domestic and international mediation.

vi. making the mediated settlement agreement resulting from mediation enforceable in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a judgment or decree of a Court.

Overview of the Bill:

i. The provision under Section 2 of the Bill permits/assigns application of the Bill in cases where a mediation is conducted in the territory of India, and (a) all or both parties habitually reside in or are incorporated in or have their place of business in India; or (b) the mediation agreement provides that any dispute shall be resolved in accordance with the provisions of the Bill; or (c) international mediation, where at least one party is an individual who is a national of or habitually resides in any country other than India or a body corporate with its place of business outside India. However, the provisions of the Bill shall not apply where one of the parties to the dispute is the Central or State Government (or any of their functionaries), except where the matter pertains to a commercial dispute (as defined under the Commercial Courts Act, 2015).

ii. Under Section 7 of the Bill, certain disputes inter alia involving allegations of fraud, fabrication of documents, forgery, impersonation and coercion are rendered unfit for mediation. This is also the case for disputes relating to claims against minors, persons of unsound mind and persons with intellectual disabilities.

iii. The Bill provides for compulsory pre-litigation mediation, requiring parties to attempt resolution of their disputes by mediation, before approaching courts/tribunals. The Bill mandates that parties attend a minimum of two pre-litigation mediation sessions, before withdrawing from the process. However, Section 8 of the Bill also provides that in exceptional circumstances, a party may, before the commencement of or during the continuation of mediation proceedings, file appropriate proceedings before a court or tribunal of competent jurisdiction seeking urgent interim measures and the court or tribunal shall after granting or rejecting urgent interim relief, as the case may be, refer the parties to undertake mediation to resolve the dispute, if deemed appropriate.

iv. Under Section 22, a Mediated Settlement Agreement (“Agreement”) means and includes a written agreement between the parties resulting from mediation, settling some or all the disputes between them, and authenticated by the mediator. Further the Agreement is required to be registered with the State/ District authorities constituted under the Legal Services Authorities Act, 1987, as the case may be.

v. The Bill further provides that the Agreement shall be final and binding on the parties and enforceable in the same manner as if it were a judgment or decree passed by a court and is open to challenge on the grounds of fraud, corruption, impersonation or where the mediation was conducted in respect of disputes or matters unfit for mediation. An application challenging the Agreement cannot not be made after 90 (ninety) days have elapsed from the date on which the party making the application received the copy of the Agreement under Section 22(3).

vi. In cases of disputes involving the Central Government or the State Government, Section 50 of the Bill provides that the settlement agreement arrived at shall be signed only after obtaining the prior written consent of the competent authority of such government body.

vii. The Bill also provides for community mediation with prior mutual consent of parties for resolution of disputes affecting the peace, harmony and tranquility amongst residents or families of any area or locality and empowers the concerned Authority or District Magistrate or Sub-Divisional Magistrate to constitute a panel of three mediators for conducting the community mediation. However, any settlement agreement arrived at in a community mediation shall not be enforceable as a judgment or decree of a civil court.

viii. Section 33 of the Bill provides for the establishment of the Mediation Council of India by the Central Government. Section 40 further provides that such Council shall inter alia endeavour to promote domestic and international mediation in India through appropriate guidelines and also lays down the framework/protocol for the continuous education, certification, and assessment of mediators by recognised mediation institutes.

Observations/ Recommendations of the Parliamentary Standing Committee:

i. The Committee observed that making pre-litigation mediation mandatory may result in further delay of cases and may prove to be an additional tool in the hands of errant litigants to delay the disposal of cases. According to the Committee, pre-litigation mediation should be optional and not mandatory, and should be introduced in a phased manner, as opposed to its immediate implementation in matters related to all civil and commercial disputes.

ii. The Committee recommended that the Bill may be suitably modified so that the government-related disputes are not excluded from its purview, considering the intended purpose of the Bill to reduce pendency of cases in courts.

iii. The Committee made a crucial observation regarding the time limit for completion of the mediation process. The Committee recommended that the same be reduced to 90 days, with an extended period of 60 days.

iv. Considering that the mechanism of online dispute resolution gained severe traction during the Covid 19 pandemic, the Committee also recommended that detailed provisions and modalities for online mediation be incorporated within the Bill.

v. The Committee also observed that the non-enforceable character of the settlement agreement arising out of community mediation will defeat the very purpose of a community mediation.

vi. The Committee observed that the purpose of the SCM is to facilitate international trade and commerce by enabling disputing parties to easily enforce and invoke settlement agreements across borders. Having noted that India has not ratified the SCM and the reasons in support thereof, the Committee recommended that the present definition of ‘International Mediation’ be revisited, so that, in future, the provisions of SCM can be incorporated in the enactment without any ambiguity.

Conclusion

A mediated settlement, by its very nature, is not very susceptible to a challenge (and objections, if at all, is restricted to limited specified grounds). A mediated settlement would, therefore, reduce the burden not only of Courts of original jurisdiction, but also appellate and writ Courts, along with the Supreme Court. Such an avenue of dispute resolution is also very cost effective (does not entail payment of Court fee or legal/professional fee) and time efficient. However, given the frame of mind of parties in a dispute scenario, merely leaving their representatives in a room together with a passive mediator, will only be counter-productive. An effective mediation is centred around a skilled mediator, without whom the process is fait accompli. It is, therefore, imperative that an adequate framework for training appropriate mediators be included either in the Act, or the Rules/Regulations to be framed thereunder.

An area of concern in the regime contemplated in the current version of the Bill, are the provisions relating to International Mediation, which do not appear to be entirely in consonance with international standards or practices. The Bill ought to be brought in line with the international practices, enabling parties to easily enforce settlement agreements across different jurisdictions, while retaining the necessary checks and balances.


[1] https://njdg.ecourts.gov.in/njdgnew/?p=main/pend_dashboard

[2] https://njdg.ecourts.gov.in/hcnjdgnew/

[3] https://main.sci.gov.in/statistics

[4] Statement of Objects and Reasons of the Meditation Bill, 2021

[5] Inserted by the Code of Civil Procedure (Amendment) Act, 1999 with effect from 1/7/2002.

[6] Section 12A of the Commercial Courts Act, 2015.

[7] M/s Patil Automation Private Limited and Ors. v. Rakheja Engineers Private Ltd. SLP (C) No. 14697 of 2021.