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A forward plunge in the realm of alternate dispute resolution – India’s Mediation Act 2023

A forward plunge in the realm of alternate dispute resolution – India’s Mediation Act 2023

The Mediation Act, 2023 (the “Act”) has recently received the assent of the President of India on 14 September 2023 and notified in the Gazette on 15 September 2023. The Act will come into force upon notification by the Central Government. With this, the legal landscape of Alternate Dispute Resolution is set to see a new wave of color with the introduction of statutory mediation in India governed by a standalone Act.

The introduction of this Act is indeed a welcome step towards promoting speedy resolution and unclogging the Courts/Tribunal burdened with a huge pendency of case (which presently stands at a staggering number of 50 million cases[1] pending across the Hon’ble Supreme Court, High Courts and various District Courts).

The legislative intent behind the Act is essentially to unburden the judiciary and channelize disputes involving monetary claims for resolution through mediation first. Only when there exists no possibility of settlement is when such dispute may be brought within the purview of judicial intervention.

As on date, India is one of the fastest growing economies in the world, attracting numerous foreign investment opportunities. Considering that India is projected to become the third largest economy in the world in the next few years with its GDP estimated to cross the USD 5 Trillion benchmark, the likelihood of an increase in potential disputes also follows.

Therefore, effective resolution of disputes becomes the backbone of a growing economy – and this Act is a progressive step towards strengthening the same. In this Article, we briefly discuss the salient features of the Act as follows.

The Scope of the Act

The Act provides an exhaustive procedure for initiating, conducting and concluding mediation proceedings. The Act further proposes to establish a statutory authority[2] responsible to regulate and promote dispute resolution through mediation for disputes of civil and commercial nature.

The statement and object of the Act abundantly explains the scope of the statute:

The Act also consequently proposes to amend the Indian Contract Act 1872; the Code of Civil Procedure 1908; the Legal Services Authorities Act, 1987; the Arbitration and Conciliation Act, 1996; the Micro, Small and Medium Enterprises Development Act, 2006; the Companies Act, 2013; the Commercial Courts Act, 2015 and the Consumer Protection Act, 2019 to incorporate necessary provisions in the statutes in order to align with the mandate of the Act.

Disputes excluded from the purview of the Act

While the Act provides for mediation of disputes having civil and commercial nature, the Act specifically excludes disputes of certain categories[3] for resolution through mediation. They are:

  • Criminal offenses;
  • Disputes relation to claims against minors, persons with intellectual disabilities;
  • Matters in conflict of public policy or opposed to basic notions of morality and justice;
  • Matters or complaints concerning issues related to registration or misconduct alleged against a person providing professional services;
    Disputes involving third party rights, except in case of matrimonial disputes with a child’s interest at stake;
  • Matters within the purview of land acquisition laws; and
  • Matters within the scope of National Green Tribunals Act, 2010; the Competition Act, 2002; the Telecom Regulatory Authority of India Act, 1997; Electricity Act, 2003; Securities and Exchange Board of India Act, 1992; the Petroleum and Natural Gas Regulatory Boards Act, 2006

This Schedule previously[4] included disputes involving allegations of fraud, fabrication of documents, forgery and coercion which are now excluded from the Schedule. The rationale being that many civil disputes having the above elements, may then fall within the exclusions under Schedule I of the Act.

Applicability of the Act

The Act is made applicable[5] to mediation conducted in India wherein:

  • all or both parties either reside in India or incorporated in India or have a place of business in India;
  • to agreements providing for mediation to be governed by the Act; and
    international mediation[6]
  • The Act prospectively applies to mediation/conciliation which commences after the Act coming into force.[7]

So far as the Central or State government and/or its instrumentalities are concerned, only commercial disputes can be referred for mediation in terms of the Act, and no other unless specifically notified.

The Act does not define “place of business” and “habitual residence”, concepts that have otherwise been subject to judicial interpretation in the past. This is likely to leave some room for interpretation and it will be relevant to see how the position is clarified by the Courts in times to come.

Mediation Agreement

Mediation in terms of the Act is defined[8] as a process whether referred to by the expression mediation, pre-litigation mediation, online mediation, community mediation, and any expression with a similar import.

The Act defines ‘Mediation Agreement’ as a separate agreement or merely a clause in an agreement in writing, a document signed by the parties, a communication/exchange, a reference to mediation agreement – so long as it expresses the intent of amicably resolving the dispute.[9]

Interestingly, the Act has given a wider connotation to settlement through mediation within its aegis, therefore even if standard contracts from the past referring to settlement through “discussions” or “conciliation” are continued to be used by commercial/government entities, the same would qualify to fall within the scope of “mediation” within the meaning of the Act. This is of course subject to parties first consenting to mediate in accordance with the Act.

Pre-litigation Mediation – mandatory or voluntary?

The reference of a dispute for resolution by mediation in terms of the Act, which was proposed as a mandatory requirement in the Mediation Bill, 2021 (the “Bill”), is now being made voluntary.[10] Therefore parties ‘may’ refer a dispute for resolution by mediation and the same is not a condition precedent before approaching the courts/tribunals.

However, so far as commercial disputes with a claim value equivalent to or over the ‘specified value’ in terms of the Commercial Courts Act, 2015 are concerned – mediation shall be undertaken in terms of Section 12A of the Commercial Courts Act, 2015 and rules made thereunder.

Considering that the Act has specifically done away with the mandatory requirement for reference, it will be interesting to see the extent to which litigants will opt for dispute resolution by mediation.

Notably, in the Bill the parties were also provided with an option to withdraw from mediation after two sessions[11]. Further, the Bill also proposed provisions allowing parties to approach the Courts/Tribunals to seek interim reliefs during or after the commencement of the mediation proceedings.[12] However the Act has no such provisions, perhaps owing to reference being made voluntary.

The Act however provides for powers of the courts/tribunals to refer the parties for resolution by mediation, and granting interim reliefs, if required.[13] Since pre-litigation reference to mediate is not mandatory (except for commercial disputes of specified value or above), the courts/tribunals will assume a greater role in promoting and referring disputes for mediation – where settlement is plausible.

Appointment of Mediator

The Act provides for appointment of a mediator by mutual agreement. This person may be of any nationality, including a foreign national so long as they possess the requisite qualifications[14]. In the event a consensus cannot be arrived upon, the Act provides for an application to be made to the ‘Mediation Service Provider’[15] for appointing a Mediator.

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