An average civil litigation in India typically spans over 8 years before a judgment is delivered, making the alternate dispute resolution (ADR) process an attractive option. In India, until now, ADR has been synonymous with arbitration, favored by lawmakers and legal fraternity over any other forms of ADR. The Arbitration Act of 1940 established arbitration in India, while the Arbitration Act of 1996 recognized the UNCITRAL Rules, thereby aligning with international standards in arbitration. Recent amendments in 2015 and 2021 aimed to position India as a global arbitration hub. However, now the legislature has shifted its focus on mediation as another form of dispute resolution, reflecting evolving priorities in the legal landscape by introducing the Mediation Act, 2023 ("the Act).
The government’s proactive action of passing such an Act represents a positive stride towards alleviating an overburdened judiciary, encouraging the alternate dispute resolution mechanism, and making India not only a hub for Arbitration but also mediation.
The Act aims to promote and facilitate voluntary mediation, especially institutional, community, and online mediation which are intended to resolve disputes in a time-bound manner. The Act lays down rules for the mediation process, the role of parties and how can a mediation settlement agreement be enforced. The Act applies to all parties that habitually reside, are incorporated in, or have their place on business in India, giving effect to a widespread applicability of the Act in India. Additionally, the Act applies to government bodies where the dispute involved is of a commercial nature.
The key aim of the Act is to facilitate the process of pre-litigation mediation in civil and commercial disputes. Parties, either bound by a mediation agreement or mutually given consent, aim to resolve the disputes amicably through mediation before approaching a court or tribunal. Commercial disputes governed by the Commercial Courts Act, 2015 where the claim amount is more than three lakh rupees are mandatorily required to be first resolved through mediation, unless the same contemplate any urgent relief, and the parties are barred from approaching courts before attempting mediation.
The Act specifies disputes that are unsuitable for mediation (including criminal offenses, tax refund disputes, Telecom Regulatory proceedings, disputes affecting the rights of others, proceedings under the SEBI Act, etc.) However, the Act empowers parties to mediate compoundable disputes, like matrimonial offenses pending in court, where a compromise deed is feasible.
Other than Institutional Mediation where the parties are referred to a specialized institute, the Act promotes Online Mediation, which employs internet-based tools. Parties with written consent can opt for online mediation, thus, saving cost and time. The Act also promotes Community Mediation for the resolution of disputes that are likely to affect the peace and harmony of a local community, overseen by a panel of three mediators.
The Act allows the court to refer parties to mediation at any stage of the proceedings, irrespective of whether a mediation agreement exists or not. Mediation under the Act can be initiated in two ways: by one party issuing a notice invoking mediation under the mediation agreement or by parties consenting to the appointment of a meditator. The mediator must be independent and impartial, and guided by the principles of objectivity and fairness while facilitating the parties to reach a settlement.
The role of the mediator is to facilitate a voluntary amicable settlement of disputes. The mediator is there to assist parties in identifying the issues, exploring areas of settlement, and generating options to expeditiously resolve the dispute while keeping intact, the responsibility of the parties to make decisions regarding their claims. However, a mediator cannot impose a settlement on the parties or give assurances that the process will result in a settlement.
The Act mandates a specific timeline to ensure timely resolution of disputes. Mediation proceedings are required to be completed within 120 days from the date of the first appearance of the mediator, extendable for up to 60 days by the mutual consent of the parties. If no settlement is reached within 120 or 180 days, the mediator is required to make a non-settlement report while adhering to principles of confidentiality and submit their report to, either the institution overseeing the mediation or the parties, in case of non-institutional mediation.
In cases of settlement, a written agreement authenticated by the mediator and signed by all parties is mandatory; failure to do so renders the settlement void. Authenticated settlement agreements are legally binding and enforceable like decrees issued by the Courts. Parties can challenge settlements on restricted grounds of fraud, corruption, impersonation, or if the subject matter falls outside the Act's scope.
Confidentiality lies at the heart of mediation, with all parties legally obligated to keep all statements, proposals, documents, and all other communications confidential. Recording of any proceedings is strictly prohibited, and any information disclosed during the proceedings cannot be used as evidence in any court, arbitration, or legal proceedings.
The Mediation Council of India which is to be established under the Act, will promote both domestic and international mediation. Its responsibilities include educating and certifying mediators, conducting training programs for lawyers and stakeholders, establishing criteria for certifying mediation institutes, etc. With the help of the Council, the implementation of the Act is expected to be quick and not a mere formality with the parties.
Arbitration took over 60 years to establish itself as an alternative to courts in India. The Act represents a decisive action by the government to promote mediation in India. However, for successful implementation and adoption nationwide, the Act needs to secure widespread acceptance and backing from the entire legal fraternity, including judges, public and private sector undertakings, and the public at large. This support is crucial given the advantages of mediation, such as its efficiency, cost-effectiveness, and enforceability.
Authored By:
Sonal Kumar Singh, Managing Partner
Ratik Sharma, Principal Associate
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