India: The Mediation Act 2023 - will the ADR wave pick up momentum?

Monday 11 March 2024

Payel Chatterjee
Trilegal, Mumbai

Shuchita Choudhry
Trilegal, Mumbai

The Indian judiciary has been saddled with never ending litigations. Pre-institution mediation was viewed as a ray of hope towards reducing such burden, but in reality, it was just a stepping stone before initiating litigation. As per recent statistics published by the National Legal Services Authority (available here and here), a statutory body established under the Legal Services Authorities Act, 1987, approximately 0.11 million cases were settled through mediation between April 2022 to June 2023. However, when viewed from a macro perspective, the number remains low with more than ten million civil cases pending before Indian courts. One reason might have been that until now, India lacked a statutory mediation framework in place.

Above: Judicial data grid at 13 September 2023

Both the Houses of Parliament, having passed the Mediation Bill, 2021 ('Bill') in August 2023, had finally reinforced the importance of the fastest growing mode of alternate dispute resolution in India. The Bill received the presidential assent in September, with India having its first ever independent legislation on mediation, ie, the Mediation Act, 2023 ('Mediation Act'). The Mediation Act provides for a comprehensive framework to promote and invigorate mediation as a successful mode of alternate dispute resolution.

The objective of the Mediation Act, accessible here, is to 'to promote and facilitate mediation, especially institutional mediation, for resolution of disputes, commercial or otherwise, enforce mediated settlement agreements, provide for a body for registration of mediators, to encourage community mediation and to make online mediation as acceptable and cost-effective process and for matters connected therewith or incidental thereto'.

The Mediation Act has been introduced with the primary goal of establishing mediation as a recognised and acceptable mode of alternate dispute resolution and granting validity to the settlements arrived thereunder, irrespective of its nature – domestic or involving foreign parties, however conducted in India. The key features of the Mediation Act include:

  • voluntary option to parties to mediate any civil and commercial disputes before instituting any legal proceedings in court whether or not any mediation agreement exists; 
  • setting out requirements of a mediation agreement, i.e., mediation agreement must be in writing, by or between parties and anyone claiming through them, to submit to mediation all or certain past, present or future disputes;
  • a provision for the parties to seek interim relief in exceptional circumstances from a court or tribunal having competent jurisdiction before the commencement of, or during the continuation of the mediation proceedings;
  • upholding party autonomy and giving a right to the parties to appoint a mediator and determine the procedure of appointment, qualifications, experience, and accreditation;
  • allowing parties to approach a mediation service provider for appointment of mediator, within a stipulated timeframe of seven days;
  • framework to prevent conflict of interest, providing for disclosure requirements and obligating the mediator to be independent, neutral and impartial;
  • every mediation to be undertaken within the territorial jurisdiction of the court or tribunal of competent jurisdiction to decide the subject matter of the dispute, except in cases where parties mutually agree to conduct the mediation at any place outside of the territorial jurisdiction or online; 
  • setting up a Mediation Council of India with functions such as registration of mediators, train and certify mediators and setting out standards of professional and ethical conduct of mediators;
  • list of disputes which are excluded from mediation such as disputes involving criminal prosecution, serious allegations of fraud, rights of third parties, land acquisition and proceedings before the Securities and Exchange Board of India, and the Securities Appellate Tribunal, under the Securities and Exchange Board of India Act, 1992; 
  • upper time limit of 180 days for concluding the mediation proceedings; 
  • treating mediation agreements as final, binding, and enforceable in the same manner as a court decree; 
  • limiting the grounds of challenge to a mediation agreement to fraud, corruption, impersonation and where the mediation was conducted in disputes not fit for mediation;
  • provision for community mediation that may be attempted to settle disputes likely to impact peace and harmony amongst residents of a community; (ix) obligation to maintain confidentiality; and lastly
  • extending application to international mediations (where one party is a foreign party) conducted in India, amongst several others.   

Three striking aspects that invite attention of users:

Firstly, the Mediation Act provides for a voluntary option to parties to mediate any civil and commercial disputes before instituting any legal proceedings in court.  Initially, when the Bill was introduced in Rajya Sabha, the Bill provided for mandatory mediation before institution of any legal proceedings. However, the Mediation Act was amended from mandatory mediation to voluntary mediation on the recommendations of the Parliamentary Standing Committee which observed that 'by mandating pre-litigation mediation, parties will have to wait for several months before being allowed to approach a court or tribunal.  This may result in delaying of cases.'  This is in stark contrast with the already existing mandatory pre-institution mediation in commercial disputes provided under the Commercial Courts Act, 2015. 

Secondly, in today’s digital times, the Mediation Act institutionalises online mediation, i.e., mediation conducted by use of electronic form or computer networks but not limited to an encrypted electronic mail service, secure chat rooms or conferencing by video or audio mode or both.  This may be seen as welcome step encouraging parties in different jurisdictions to mediate.  

Thirdly, the Mediation Act excludes a provision for enforcement of settlement agreements arising out of international mediation conducted outside India where one party may be an Indian party. This may not be seen in favour of international trade and cross-border dispute resolution and at par with the international framework such as the United Nations Convention on International Settlement Agreements Resulting from Mediation (2019), to which India is a signatory.  

India is witnessing a phenomenal rise in economic growth, foreign investments, and international disputes. The question remains whether the Mediation Act will auger well and achieve its objective in today’s cross-border business world. The larger issues that daunt us are whether the parties, either Indian or foreign, will voluntarily opt for mediation. We have witnessed over the years that industry players lack faith in mediation and often treated mediation as an informal checkbox exercise. The need of the hour is to break the so-called myths surrounding alternate dispute resolution mechanisms, by including private players and public-sector undertakings to voluntarily opt for mediation, reaping the benefits of the Mediation Act and recognising mediation as a formal alternate dispute resolution mechanism. 

Further, non-inclusion of government parties unless it qualifies as a commercial dispute may also draw sufficient criticism given government is the biggest litigant in the country. Like all other ADR modes, key is the intent of parties, which determines the faith of a dispute. The judiciary along with the legislature have taken strides to make mediation a success, but lot remains to be done. Possibly, one of the modes of encouragement could come in from the judiciary on referring parties to mediation if such clause exists as predominantly done in case of arbitrations. 

As a starting point, once the Mediation Council of India is constituted, pro-active steps need to be undertaken to promote mediation. This includes the largest litigator in India, i.e., government/ public sector undertakings to include mandatory mediation in their contracts; having multi-tier dispute resolution clauses, collaborating with the business community, corporates, and in-house counsels to spread awareness; cutting through all medium and small cities in India which are business-centric and promote mediation within the micro, small and medium enterprises; and demonstrate effectiveness of mediation with empirical data and share practical examples of success stories. Having said that, the Mediation Act is a step in a right direction. It will break the unwavering perception of the business community on mediation and foster confidence to include institutional mediation in dispute resolution clauses.