“A good compromise is when both parties are dissatisfied”
Larry David, Curb Your Enthusiasm: The Complete Seventh Season.
The above quote is frequently used by Mediators during the mediation process in various ways to offer a fresh perspective to parties sticking to their original positions.
Introduction
1. In December 2021, the Mediation Bill of 2021 was introduced in the Rajya Sabha, followed by a referral to the Standing Committee on Personnel, Public Grievances, Law & Justice. On July 13, 2022, the committee issued its 117th Report, which included specific recommendations for the Bill. Some of these recommendations gained approval from the Union Cabinet. Consequently, the Mediation Bill of 2023, commonly referred to as the 'Mediation Bill,' successfully passed both the Rajya Sabha on August 2, 2023, and the Lok Sabha on August 7, 2023. Upon receiving Presidential assent, it will formally become the 'Mediation Act of 2023.'
2. The Concept of Mediation is ancient and deeply rooted in our country. It has been practised in the form of the Panchayat system for centuries, in which respected elders of the village worked as mediators between the parties and helped to resolve their disputes.
3. Mediation is one of the key components of Alternative Dispute Resolution (“ADR”) which also includes Arbitration and Conciliation. The growing adoption of the ADR mechanism has aided in reducing the burden on the judiciary and thus facilitated prompt and equitable delivery of justice to the nation's citizens. According to the "Survey of Dispute Resolution in India, 2023," conducted jointly by the Federation of Indian Corporate Lawyers (FICL) and the Centre for Trade and Investment Law (CTIL), participants have ranked Mediation/Conciliation as the second most favoured method of dispute resolution in India.[1]
4. In its essence, Mediation constitutes a conflict resolution methodology wherein two or more disputing parties reach a mutually acceptable resolution, guided by a neutral third party. It is important to note that a mediator does not hold the role of a judge but rather functions as a facilitator, aiding the involved parties in identifying common ground and achieving consensus.
Need of the Mediation Act.
5. During a discussion on the draft legislation on The Mediation Bill, Union Minister for Law and Justice, Arjun Ram Meghwal, said, "Mediation is not a new concept for an ancient country like India. Several examples of mediation are available in different texts and scriptures." He added that the Bill aims at addressing and resolving the problems of the poor. The Law Minister said that about 70,000 cases are pending in the Supreme Court and another 60 lakh were pending arbitration in high courts. He noted that as many as 4 crore cases were pending in the district and subordinate courts.[2]
6. There has been a significant demand for the introduction of a dedicated mediation law, aimed at establishing a formal framework for the mediation process and eliminating discrepancies found in various existing statutes, such as the Code of Civil Procedure 1908, the Industrial Disputes Act 1947, and the Commercial Courts Act 2015, among others. Additionally, it became imperative to enact legislation that could effectively address both domestic and international mediation matters. Furthermore, India signed the Singapore Convention on Mediation ("Singapore Convention") on August 7, 2019, which has standardised and unified rules for mediation in international commercial disputes; however, the ratification of the Singapore Convention is still pending.
7. Furthermore, there is a lack of consistent procedural rules governing the mediation process, resulting in proceedings adhering to the guidelines prescribed by individual High Courts. These inter-alia factors have created obstacles in fully realizing the advantages of mediation. Additionally, some statutes such as the Companies Act 2013, MSME Act 2006, and Industrial Relations Code 2020, among others, include provisions for mediation as a dispute resolution mechanism. However, in cases falling under these statutes, post-litigation scenarios are governed by the Code of Civil Procedure (CPC), and even pre-litigation mediation remains unregulated.
8. It is worth highlighting Section 12A of the Commercial Courts Act, which mandates pre-litigation mediation for all cases brought before commercial courts, except in cases requiring urgent relief. Regrettably, parties have sometimes exploited this exception to circumvent mediation, resulting in the provision's failure to achieve its intended objective.
9. Given the identified gaps in the existing legal framework, the proposed Mediation Bill of 2021 seeks to regulate various aspects of mediation within the Indian legal system.
Core Provisions of the Mediation Bill
10. Scope of the Mediation Bill: The Mediation Bill will apply to mediation/conciliation proceedings carried out within India under the following circumstances:
(i) when all involved parties reside in, are incorporated in, or operate their businesses within India,
(ii) when the mediation agreement explicitly stipulates adherence to this Bill,
(iii) in cases of international mediation, which pertains to commercial disputes involving at least one party that is a foreign government, foreign national/resident, or an entity with its business premises located outside India. The Statement of Objects and Reasons of the Bill states that Mediation will subsume conciliation under Part III of the Arbitration and Conciliation Act, 1996 and both terms “mediation” & “conciliation” shall be used interchangeably.
11. In instances where the central or state government is a party to the mediation, the Mediation Bill jurisdiction is limited to (a) matters pertaining to commercial disputes, and (b) other disputes as specified by the respective government through notification. However, the Mediation Bill will not override the statutes specified in the Second Schedule which include The Industrial Disputes Act, 1947; the Industrial Relations Code, 2020; the Family Courts Act, 1984; the Finance Act, 2016; the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, amongst others.
12. A broad aperture has been provided under Sections 4 & 5 of the Bill for parties to commence mediation. This can be done either by incorporating a dedicated mediation clause within the contract, entering into a separate agreement, or in cases where no prior "mediation clause" exists, the parties may opt for mediation by mutual agreement to resolve any current or impending disputes.
13. Pre-litigation Mediation: In case of civil or commercial disputes, a person must try to settle the dispute by mediation before approaching any court or certain tribunals as notified. Even if the parties fail to reach a settlement through pre-litigation mediation, the court or tribunal may at any stage of the proceedings refer the parties to mediation if they request for the same.
14. Subject matter of disputes: Section 7 of the Mediation Bill sets forth a prohibition on specific disputes as outlined in the First Schedule, which are ineligible for mediation referral. These encompass disputes encompassing criminal offense prosecution, both direct and indirect tax disputes, and conflicts entailing the rights of third parties (with the exception of cases involving a child's welfare in matrimonial matters).
15. Interim Reliefs: Section 8 of the Mediation Bill incorporates a provision allowing parties to seek recourse to the court or tribunal with appropriate jurisdiction in the event of extraordinary circumstances, necessitating urgent interim relief either prior to or during the mediation process. However, the Bill refrains from providing specific details regarding what constitutes "exceptional circumstances," leaving this matter open to judicial interpretation.
16. Period of Mediation: As per the 2023 Bill, mediation is to be completed within a period of 120 days, with a maximum extension of 60 days. The Mediation Bill has fixed a time limit of 180 days to complete mediation. Furthermore, the Bill stipulates that parties have the right to withdraw from mediation after the initial two mediation sessions. Nevertheless, if a party fails to attend these first two sessions without valid justification, resulting in the mediation's failure, such behaviour may be considered by the court or tribunal when determining costs in any subsequent legal proceedings involving the same subject matter.
17. Enforceability of Mediated Settlement Agreements (MSA): Chapter 6 of the Bill deals with the enforcement of the settlement arrived through mediation. The Bill envisions that the settlement would be documented in writing, bearing the signatures of the parties involved, and officially validated by the mediator. Following this authentication, the settlement would be enforceable in accordance with the provisions of the Civil Procedure Code, 1908 treating it as if it were a court-issued judgment or decree. This stands in contrast to a settlement agreement reached through conciliation under the Arbitration Act (which is currently proposed for removal), which carries the status and legal effect of an arbitral award.
18. Procedure to challenge the MSA: The threshold to contest MSA is very narrow such as fraud, corruption, impersonation, or if the subject matter of the dispute was unsuitable for mediation. To initiate such a challenge, the concerned party must file an application before the court or tribunal that holds the requisite jurisdiction within 90 days from the date they received the authenticated MSA copy. In cases where the court is convinced that the applicant had valid reasons preventing them from filing the application within the initial 90-day period, an extension of up to another 90 days may be granted.
19. Online Mediation: To keep abreast with the acceptance of conducting online mediation during COVID times, The Bill embraces the concept of online mediation as a means to overcome logistical challenges for parties to travel, etc. It offers parties the option to engage in mediation virtually. Nevertheless, to uphold the security and effectiveness of such online mediation, it becomes crucial to establish clear regulations governing the conduct of participants throughout these virtual proceedings, as well as rigorous procedures to be adhered to during the mediation process.
20. Confidentiality: Confidentiality is at the heart of a mediation process and is critical to a successful resolution. The parties must be assured that they can share sensitive information at the session, where it is necessary to see that their true needs and interests may be met, without fear of subsequent disclosure to their detriment. The Bill explicitly specifies that all proposals, admissions, as well as documents exclusively created for the mediation process, must be treated with the utmost confidentiality.
21. Mediation Council of India: The Mediation Bill outlines the formation of a Mediation Council of India consisting of seven members. The Council will consist of a chairperson, two full-time members (with experience in mediation or ADR), three ex-officio members (including Secretaries in the Ministries of Law and Justice and Finance), and one part-time member (from an industry body). This council's primary role is to foster the practice of mediation, both within the country and on an international scale, register mediators, recognise mediation service providers and mediation institutes, etc.
22. Institutional mediation: Chapter 9 of the Bill envisions the establishment of a 'Mediation Service Provider and Mediation Institutes' whose primary functions would be to accredit mediators, curate a panel of qualified mediators, offer necessary facilities and administrative support for the mediation process, and more. Furthermore, the Bill specifies that the grading of these Mediation Service Providers would be overseen by the Mediation Council of India.
23.Upon the official enactment of the Mediation Bill into law, the specified statutes will undergo amendments as outlined from Third Schedule 3 to Tenth Schedule namely:
i. The Indian Contract Act, 1872,
ii. The Code of Civil Procedure, 1908,
iii. The Legal Service Authorities Act, 1987,
iv. The Arbitration and Conciliation Act, 1996,
v. The Micro, Small and Medium Enterprises Development Act, 2006,
vi. The Companies Act, 2013,
vii. The Commercial Courts Act, 2015,
viii. The Consumer Protection Act, 2019.
Conclusion
24. The mediation principles embedded in current Acts barring a few like the Commercial Courts Act 2015, etc have become somewhat outdated in the context of our contemporary times. The Mediation Act, serving as a comprehensive framework, will not only modernize these existing practices but also establish a unified and harmonized approach, aligning them with the demands of today. The age-old saying, "the proof of the pudding is in the eating," underscores that the real evaluation occurs during actual implementation. Any shortcomings or deficiencies in the Mediation Act will become apparent only when it is applied in practice.
[1] https://newsonair.gov.in/News?title=Parliament-passes-Mediation-Bill-2023&id=465709
[2] https://www.ficl.org.in/law/2023/05/30/release-of-indias-first-survey-on-dispute-resolution-in-india-by-ficl-ctil-by-justice-navin-chawla-delhi-high-court
