Mediation In Commercial & Business Dispute

 

Mediation In Commercial & Business Dispute

• Shubhashish Banerjee

Introduction

In India, mediation has historical roots, notably through Panchayats for community conflict resolution. Section 89(1) of the Code of Civil Procedure, 1908 empowers courts to suggest various methods, including mediation, for dispute resolution. While mediation centres exist across India, private mediation lacks structure and legal recognition, hindering participation. To address this, the Mediation Bill 2021 was proposed to establish a comprehensive legal framework and enhance the effectiveness of mediation.

Hence, the Mediation Act of 2023, a landmark legislation in India, was enacted to revolutionize the process of dispute resolution in India. After receiving the Presidential assent on September 14, 2023, the Act is set to transform the landscape of mediation, emphasizing institutional mediation, online mediation, and community mediation (Lok Adalat). This article explores the key provisions and implications of the Act, its applicability, exclusions, and the potential impact on the Indian legal system.

Understanding Mediation and Its Evolution

Mediation, as defined in Section 3(h) of the Act, is a process wherein parties attempt to reach an amicable settlement between the parties with the assistance of a third-party mediator. This mediator lacks the authority to impose a settlement but can facilitate dialogue and negotiation. While mediation is not a new concept, but its formal recognition and promotion through legislation shows a significant shift in dispute resolution mechanisms in India.

The primary objective of the Mediation Act 2023 is to broaden its reach by formally acknowledging pre-litigation mediation, online mediation, and community mediation within the definition of 'mediation.' This adjustment aims to eliminate the distinction between mediation and conciliation, aligning with international norms where these terms are often used interchangeably. The Country’s first annexed Mediation Centre was set up in Madras High Court on April 9th, 2005. Following its notable success and the endorsement of it by the then President of India Dr. APJ Abdul Kalam who visited the centre personally and owing to the efforts of the Mediation and Conciliation Project Committee (MCPC) of the Supreme Court of India, Mediation has moved very fast through the court annexed system. It has been used by the apex court for a few public disputes – such as the Assam-Nagaland Border dispute and the Ayodhya Babri Masjid Ram Janmabhoomi dispute.

Applicability 

On being notified, Section 2 of the Act states that the Mediation Act shall apply to mediations conducted in India. It would inter alia apply to mediations where:

1) all parties habitually reside or incorporated in or have their place of business in India, or

2) the mediation agreement imports the applicability of the Mediation Act, or

3) there is an international mediation in relation to a commercial dispute provided one of the parties is an individual who is a national or habitually resides in a country other than India, or a body corporate/association/body of individuals having place of business outside India, or

4) Further, where one of the parties is the Central/State Government or any entity/body controlled or owned by such Government, the Mediation Act will be applicable only in case of a) commercial disputes, or b) any other disputes as notified.

Though the Singapore Convention provides a framework for cross-border enforcement of settlement agreements resulting from international mediation, the Mediation Act applies only to international mediations where the mediation is conducted in India but not applicable to mediations conducted outside India. More specifically, the Mediation Act does not contemplate enforcement of mediated settlement agreements resulting from mediation conducted outside India. This would, inevitably exclude enforcement of such mediated settlement agreements in India under the Mediation Act.

Despite its broad scope, Section 6 of the Act, in conjunction with the First Schedule, provides an indicative list of disputes not suitable for mediation. These include disputes against minors, criminal offenses, tax-related matters, and proceedings before statutory authorities. The Act recognizes the limitations of mediation in certain contexts, ensuring that it is applied judicially.

Pre-litigation Mediation

One of the notable features of the Act is the emphasis on pre-litigation mediation, defined in Section 3(u). This involves mediating disputes before the initiation of formal legal proceedings, offering a proactive and cost-efficient means of resolving conflicts. Pre-litigation mediation fosters transparent communication, cooperation, and adaptable solutions, saving time and resources while preserving relationships and confidentiality. As per section 12A of The Commercial Court Act, A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-litigation mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government.

Section 5(1) of the Mediation Act provides that irrespective of any mediation agreement, the parties may voluntarily, and with mutual consent, refer the dispute for settlement by mediation before filing any case of a civil or commercial nature in any court. A commercial dispute of specified value i.e. as per section 2(1)(i) of the Commercial Court Act of which the value of the subject matter is not less than 3 lakhs rupees that are subject to compulsory pre-litigation mediation under section 12A of the Commercial Courts Act, 2015. Further, any court/tribunal may at any stage of a proceeding, refer the parties to undertake mediation, irrespective of whether there is a mediation agreement or not.²⁰

Accreditation and Regulation of Mediators

Sections 8 through 12 of the Mediation Act establish the qualifications and oversight mechanisms for mediators. The legislation allows the appointment of foreign nationals as mediators under specific conditions, taking into account their qualifications and experience. The Act also addresses conflicts of interest during mediation, providing a well-defined procedure for disclosure. This ensures the integrity of the mediation process and enhances parties' trust in the system.

Time Frame And Process

Section 18 of the Act sets a time frame for the completion of mediation proceedings. Mediation must be concluded within 120 days from the date of the first appearance, with the possibility of extension to 180 days if agreed upon by the parties. This time-bound approach enhances the efficiency of the mediation process, contributing to timely and effective dispute resolution.

 

Mediation is considered initiated when a party receives notice invoking mediation as per a mediation agreement. If there is no such agreement, the commencement is from the date of the mediator's appointment or the mediator's consent to appointment, whichever is applicable. The mediator is obligated to guide the parties independently, neutrally, and impartially, adhering to principles of objectivity and fairness. Meetings with the parties, either jointly or separately, can occur as frequently as necessary. Importantly, the mediator is not constrained by the principles of the Code of Civil Procedure, 1908, or the Indian Evidence Act, 1872. This approach enhances flexibility in procedural requirements and upholds party autonomy for achieving a mutually agreeable resolution

Critiques and Challenges

While the Mediation Act of 2023 represents a significant step forward, it is not without its criticisms. Section 28 permits challenges to mediated agreements on specific grounds, such as fraud or corruption, within a limited time frame. However, the grounds for challenging the agreement are restricted and do not include issues like duress, coercion, or the discovery of fraud beyond the limitation period.

Moreover, the inclusion of pre-litigation mediation may contribute to the already time-consuming and costly litigation process. Experience from pre-institution mediation in commercial disputes suggests that defendants may choose not to participate, rendering the mediation process ineffective.

Conclusion

In conclusion, the Mediation Act of 2023 is a game-changing development in the Indian legal system. By formalizing and advancing mediation practices, the legislation promotes a culture of collaboration and cooperation in dispute resolution. While there are critiques and challenges, the Act's establishment of clear standards, confidentiality measures, and enforceability mechanisms significantly reshapes the mediation landscape.

The Act's focus on pre-litigation mediation, accreditation of mediators, and a time-bound approach reflects a commitment to making mediation the primary avenue for resolving disputes. As the Act comes into force, its impact on the legal landscape and the success of mediation in India will become clearer. Overall, the Mediation Act of 2023 is a crucial step toward a more efficient, effective, and harmonious approach to dispute resolution in the country.

Keywords: Mediation Act of 2023, Dispute resolution in India, Presidential assent, Institutional mediation, Online mediation, Community mediation (Lok Adalat), Alternative dispute resolution, Pre-litigation mediation, Commercial Court Act, Accreditation of mediators.

Citation:

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Gulati, S., Sahu, S., & Kanuga, S. (2023, September 4). DECODING THE MEDIATION ACT, 2023. Nishith Desai Associates Decoding the Mediation Act, 2023. https://www.nishithdesai.com/NewsDetails/10748#:~:text=The%20Mediation%20Act%202023%20aims,the%20definition%20of%20’mediation’. (Accessed: 07 December 2023)