An Analysis of the ‘Mediation Act, 2023’

An Analysis of the ‘Mediation Act, 2023’

Introduction

After nearly 20 months since its initial introduction in the upper house of Parliament of India, the Mediation Act, 2023 (herein after referred to as the Act) has successfully passed through both houses of Parliament and has received the assent of the President of India and was notified in the Gazette of India on September 15, 2023.

The intention behind the Act is to alleviate the pressure on the Indian courts, which are burdened with nearly 50 million pending cases, which calls for a strong dispute resolution system, while enhancing citizens lives, access to Justice, and the rule of law.

Unlike arbitration, where a neutral third party makes a binding decision, mediation serves as a method to address conflicts, allowing two or more opposing parties to find a common ground with the assistance of an unbiased third party. This makes mediation a more beneficial choice when parties value maintaining communication and control over the outcome of their dispute.

BACKGROUND & TIMELINE

While there has been no distinct legislation enacted for mediation in India until now, several statutes contain provisions for mediation. These include the Code of Civil Procedure, 1908 (Section 89 read with Order X Rule 1A), the Arbitration and Conciliation Act, 1996 (Section 30), the Micro, Small and Medium Enterprises (MSME) Development Act, 2006 (Section 18), the Companies Act, 2013 (Section 442 read with the Companies (Mediation and Conciliation) Rules, 2016), and the Consumer Protection Act, 2019 (Section 37 & 38).

A pivotal moment in the advancement of mediation for commercial disputes was when the Commercial Courts Act 2015, was introduced, which provided for mandatory pre-institutional mediation in commercial suits where no urgent relief was sought. This underscored the need for the practice of commercial mediation within the Indian legal framework.

Additionally, India was one of the first signatories to the United Nations International Convention on Settlement Agreements for Mediation, 2019 (“Singapore Convention”), an international convention which corresponds to resolving cross border disputes by way of mediation. In light of the deficiencies within the existing legal framework and pursuant to the Singapore Convention, it was crucial for India to introduce a comprehensive framework for mediation.

In light of the deliberations held in Rajya Sabha post the first introduction of the Mediation Bill (“Bill”) in 2021, it was referred to the parliamentary standing committee on personnel, public grievances, law and justice (“Standing Committee”) which had presented its report on 13th July, 2022.

Notably, the Act has partially accepted certain significant recommendation from the Standing Committee report. This includes the recommendation to reduce the timelines for completion of the mediation from 180 days to 120 days, and to incorporate the voluntary pre-litigation mediation framework, instead of a mandatory framework as provided in provisions of the Bill.

KEY HIGHLIGHTS OF THE ACT

Applicability

As per Section 2, the Act would apply to mediations conducted in India: 

  • Involving only domestic parties; or
  • involving at least one foreign party and relating to a commercial dispute(i.e., international mediation); or
  • if the mediation agreement states that the mediation will be as per the Act; or
  • one of the parties to the dispute is the central government or a state government or public bodies, corporations and local bodies, including entities controlled or owned by such government and where the matter pertains to a commercial dispute; or
  • to any other kind of dispute if deemed appropriate and notified by the central government or a state government from time to time
Scope

Upon the enactment of this Act, the scope of mediation in India will be significantly broadened to encompass various types of disputes, including inter alia civil, commercial, family, property, and environmental disputes.

The mediation framework will expand to acknowledge the sacrosanct nature of various forms of mediations including those stemming from mediation agreements, mandatory pre-litigation mediations, online mediation, community mediation, or expressions of similar arrangements.

Voluntary pre-litigation mediation and settlement

Instead of the mandatory mediation framework as provided in the Bill, the Act has created a paradigm shift from a ‘mandatory’ to a ‘voluntary’ mediation framework for the disputing parties.

Section 5(1) of the Act provides for the disputing parties to voluntarily, with mutual consent, engage in pre-litigation mediation before filing any suit or proceedings of civil or commercial nature before any court. This recourse would be available to the parties even in the absence of a mediation agreement.

However, pre-litigation mediation in commercial disputes shall only be undertaken in accordance with the provisions of section 12A of the Commercial Courts Act, 2015, and the rules made thereunder.

Disputes which are not fit for Mediation

Section 6 of the Act, read in conjunction with the first schedule provided therein, states that certain disputes, including disputes relating to minors, individuals with intellectual disabilities and disputes involving prosecution for criminal offences are ineligible for mediation.

Time-lines for the completion of mediation

Section 18 of the Act has mandated a time frame of 120 days to complete the meditation process, which can be further extended by another 60 days upon mutual agreement of the parties.

Although the Standing Committee in its report recommended for an initial period of 120 days for domestic mediation, with a further 90-day extension, and a different timeframe for international mediations (180+120 days), the Act has partially accepted this recommendation.

Binding Settlement Agreements

Section 19 of the Act defines a Mediated Settlement Agreement as a written agreement which is arrived at the end of mediation, that is authenticated by the mediator and signed by all the parties involved, and that resolves some or all of their disputes.

Further, section 28 of the Act also enables the enforcement of a Mediated Settlement Agreement in accordance with the provisions of the Code of Civil Procedure 1908, in the same manner as if it were a judgment or a decree passed by a court.

Grounds to challenge a Mediated Settlement Agreement

Section 28(2) of the Act lays down four grounds of challenge for a Mediated Settlement Agreement (other than those reached through court-referred mediation or by Lok Adalat or Permanent Lok Adalat). These include: (a) fraud; (b) corruption; (c) impersonation; (d) relating to disputes or matters not fit for mediation under Section 6 of the Act.

Recognition of Mediation Service Providers

Section 40 of the Act grants recognition to institutional mediation, by way of Mediation Service Providers’, who are characterized as entities or organizations responsible for facilitating mediation procedures.. These providers are mandated to establish operational rules and regulations aligned with the provisions of the Act to govern the mediation process.

Online & Community mediation

Chapter VII of the Act provides for the incorporation of online mediation platforms, encompassing pre-litigation mediation facilitated through applications and computer networks. This online approach to meditation can be adopted entirely or partially at any juncture of the mediation proceedings, contingent upon the parties’ written agreement.

Further, Chapter X of the Act, outlines the types of disputes where community mediation may be resorted to. This kind of mediation applies to conflicts which could disturb the tranquillity and general welfare of people or families in a particular area.

Establishment of the Mediation Council of India

Chapter VIII of the Act envisages the establishment and incorporation of the Mediation Council of India by the Central Government, and broadly lays down its duties, powers, and functions. The Mediation Council shall be established to promote mediation and to develop India as a robust centre for domestic and international mediation. It will also be responsible for making regulations, registration of mediators, grading of mediation service providers, etc.

Critical Analysis

Though the Act brings forth several progressive provisions which are capable of institutionalizing mediation as a preferred and viable mode of dispute resolution, there are certain nuances that warrant careful consideration.

One such instance lies within the first schedule of the Act which deems disputes concerning minors, deities, people with intellectual disabilities, persons of unsound mind, and persons with disabilities requiring higher support needs are ‘not fit for mediation.’ The aforementioned groups are governed by distinct legislations which establish guardianship rules, to provide for instances where such persons cannot make legally valid choices. Therefore, an exclusionary provision which restricts their recourse to mediation raises significant concerns since it decreases the avenues through which such groups access the justice system.

The provisions of the Bill had been widely criticized as the provisions was silent on what constitutes as ‘exceptional circumstances’, the only ground for seeking interim measures before the commencement of or during the continuation of any mediation proceedings. Although the Act has retained the provision of interim measures by replacing the ground of ‘excpetional circumstances’ with ‘to protect the interest of any party if deemed appropriate’, it has significantly curtailed the scope of interim measures only to such mediations which have been referred by a court or tribunal, and thereby omitted the mediations arising out of a Mediation Agreement.

Further the Act has not provided any scope of appeal in respect of such interim measures as may be granted by a court or tribunal, akin to the interim measures and appeal provisions provided under the Arbitration and Conciliation Act, 1996. Lastly, it is essential for the law to provide certain guiding principles in respect of the necessary qualifications and competencies expected of trained mediators.

Way Forward

While we await the operational rules and regulations aligned with the provisions of the Act to governing the mediation framework, the enactment of the Act marks a significant step forward for India’s dispute resolution system.

The Act’s wide-ranging scope and by promoting mediation as an efficient, cost- effective, and amicable dispute resolution mechanism, the Act is in the right path to reduce the backlog of cases, provide timely justice, and foster a culture of peaceful resolution framework in India.

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