Transforming Dispute Resolution In India: An Overview Of The Mediation Act, 2023 – Arbitration & Dispute Resolution

The Mediation Act, 2023 (‘Act’), signifies a
monumental shift in India’s approach to dispute resolution,
rooting back to its traditional Panchayat system and evolving
through legal reforms post-British rule. The Act institutionalizes
mediation, emphasizing cost-effective, timely resolution through
online and community mediation, and the establishment of the
Mediation Council of India. Applicable broadly within Indian
jurisdiction, it aims to reduce the legal system’s case backlog
and speed up dispute resolution. Exclusions apply, ensuring that
not all disputes are mediated. Definitions within the Act provide
clarity on its mechanisms and processes, setting a structured
framework for mediation proceedings, including confidentiality and
the formal conclusion of mediation. The creation of a Mediation
Fund underlines the commitment to promoting this alternative
dispute resolution method. The Act not only modernizes conflict
resolution in India, aligning with global practices but also
revitalizes the mediation landscape to meet contemporary needs,
making it a transformative piece of legislation in the field of
dispute resolution.

Background

Long before the adoption of the formal British judicial system,
the traditional Panchayat system prevailed in India, resolving
community issues through a group of village elders. Disputes were
also referred to respected businessmen, known as Mahajans, who
would informally resolve conflicts among disputing parties.

The formal integration of mediation into the Indian legal system
during the post-British era can be traced back to the Industrial
Disputes Act, 1947, which prescribed detailed procedures for
settling disputes outside the court. Subsequently, the enactment of
the Legal Services Authorities Act, 1987, led to the establishment
of Lok Adalats, further promoting the concept of mediation.

The enactment of the Commercial Courts Act, 2015¹,
introducing mandatory pre-institutional mediation for certain types
of commercial suits where no urgent relief is sought, marked
another significant advancement in favour of commercial mediation.
The Hon’ble Supreme Court has recently emphasized that this
provision is substantial and must be adhered to before any remedy
can be availed under the Act; failure to initiate pre-institutional
mediation renders a commercial suit subject to
dismissal².

Mediation in Indian Law

S. 89(1) of the Code of Civil Procedure, 1908
(‘CPC’), suggests that the Court may
recommend disputing parties settle their dispute by various dispute
resolution methods such as arbitration, conciliation, judicial
settlement, or mediation. Therefore, it is well accepted and
implemented by the Indian Courts and arbitration centres have been
established all over India. However, now, the Central Government
(‘CG’), with the aim to promote and
facilitate mediation for the resolution of disputes, introduced the
new The Mediation Bill, 2021 (‘Bill’),
after being passed by the Rajya Sabha on 01.08.2023, and by the Lok
Sabha on 07.08.2023, received the President assent on 14.08.2023,
and has been enacted by the CG through Notification No.
CG-DL-E-15092023-248775³.

Summary of the Act

The Act aims to promote and facilitate mediation, placing a
special emphasis on institutional mediation. It offers a framework
for cost-effective and timely dispute resolution through both
online and community mediation. Additionally, the Act includes
provisions for the enforcement of mediated settlement agreements
and the establishment of the Mediation Council of India.

Applicability of The Act

S. 2 of the Act delineates its applicability to mediation
processes. The Act applies to mediations conducted within India and
extends to mediations where all parties either habitually reside,
are incorporated, or have their place of business in India.
Furthermore, it applies if the mediation agreement specifies that
the dispute resolution will be conducted in accordance with the Act
if one of the disputing parties is the CG, a state government, or
any other governmental body, or if the dispute has been
specifically notified by the CG or a state government for mediation
under this Act.

Some Disputes That Are Excluded from Mediation

S. 6 of the Act, read with the first schedule, provides a list
of disputes, or matters not fit for mediation, which includes:

• Disputes against minors, deities, and persons with intellectual
  disabilities.




• Disputes in relation to prosecution of criminal offences.




• Disputes relating to the levy, collection, penalties, direct or
  indirect tax, and refunds.




• Complaints or proceedings initiated before any statutory
  authority or body in relation to the registration, discipline, or
  misconduct of any practitioner, or other registered
  professionals.




• Disputes which affect the rights of a third party.




• Any proceeding over which the Tribunal constituted under the
  National Green Tribunal Act, 2010 has jurisdiction.




• Any investigation, inquiry or proceeding under the Competition
  Act, 2002, including proceedings before the Director General under
  the Act 2002. And Proceedings before the Telecom Regulatory
  Authority of India Act, 1997 or the Telecom Disputes Settlement and
  Appellate Tribunal established as per s. 14.




• Proceeding under the Electricity Act, 2003.




• Proceeding under the Petroleum and Natural Gas Regulatory Board
  Act, 2006.




• Proceeding under the Securities and Exchange Board of India
  Act, 1992.




• Land acquisition and determination of compensation under the
  land acquisition laws.

Key Definitions

• The term ‘commercial dispute’ means a
  dispute as ascribed in as per s. 2(1)(c) of the Commercial Court
  Act, 2015.




• The term ‘community mediator’ means a
  mediator for the purposes of conducting community mediation as per
  s. 43 of the Act under chapter X.




• The term ‘institutional mediation’
  means mediation conducted under the supervision of a mediation
  service provider.




• The term ‘mediation’ includes a
  process, whether referred to by the expression’s arbitration,
  pre-litigation mediation, online mediation, community mediation,
  conciliation, or expressions of similar import, where the parties,
  with the help of a third person
  (‘mediator’) , attempts to reach an
  amicable resolution of its dispute, who is neutral towards all
  parties but who does not have the authority to impose a settlement
  on the disputing parties.




• The term ‘mediator’ means a person who is appointed by
  the parties or by a mediation service provider to conduct mediation
  and includes a person who is registered as a mediator.




• Term ‘mediation agreement’
  (‘MA’) as per s. 4(1) of the Act, shall be
  written by or between the parties and anyone claiming through them,
  to submit to mediation all or certain disputes which have arisen,
  or which may arise between the parties.




• The term ‘mediated settlement agreement’
  (‘MSA’) means mediated settlement
  agreement as ascribed in s. 19(1).




• The term ‘mediation service provider
  (‘MSP’) means mediation service provider
  referred to in s. 40(1) of the Act. It includes a body or an
  organisation, an authority constituted under the Legal Services
  Authorities Act, 1987, court-annexed mediation centre.




• The term ‘online mediation’ as per s. 30 of the Act,
  includes pre-litigation mediation that may be
  conducted at any stage of the mediation with written consent of the
  parties.




• The term ‘pre-litigation mediation’ as per s. 5 of the
  Act, is a process of undertaking mediation for the settlement of
  disputes prior to the filing of a suit or proceeding of civil or
  commercial nature. Parties must take steps to settle the disputes
  by pre-litigation mediation.

Mediation Proceedings

• Every mediation shall take place within the territorial
  jurisdiction of the court or tribunal of competent jurisdiction to
  decide the subject matter of the dispute.




• Mediation is deemed to commence from the day a party receives
  notice invoking mediation under the mediation agreement. In case
  there is no such agreement, from the date of appointment or consent
  of the mediator to be appointed.




• Mediators help resolve disputes by helping the parties identify
  the issue, develop a better understanding, clarify priorities,
  explore areas of settlement, generate alternatives, and emphasize
  the party’s ultimate responsibility for making decisions
  regarding their boundaries.




• The mediation proceeding shall be completed within a period of
  120 days from the date fixed for the first appearance of the
  mediator. Further, it may be extended for a further period of 60
  days with mutual consent of the parties.




• An MSA is required to be in writing between some or all parties
  in the mediation setting some or all disputes between such parties
  authenticated by the mediator and signed by the parties voluntarily
  and registered with an authority constituted under the Act.




• The mediator, the MSP, the parties, and the participants in the
  mediation shall keep all matters relating to the mediation
  proceeding confidential. And no mediator, participant, expert, or
  adviser engaged for the purpose shall be permitted or compelled to
  disclose any information to any court or tribunal.




• The mediation proceeding shall be deemed to be terminated on
  the date of signing and authentication of the MSA or the date of
  the written declaration of the mediator, on the date of the
  communication by a party or parties in writing or on the expiry of
  time limit as per s. 18 of the Act.




• As per s. 31 of the Act, chapter VIII, provides for the
  establishment and incorporation of a Mediation Council of India by
  the CG to perform the duties and discharge the functions of the
  Act.

Miscellaneous

• There shall be a Mediation Fund to promote, facilitate, and
  encourage mediation under the Act, which shall be administered by
  the Council.




• The Council shall maintain proper accounts and other relevant
  records and prepare an annual statement of accounting including the
  balance sheet consultation with the Comptroller and Auditor General
  of India (‘CAG’). The account shall be
  audited by the Comptroller and CAG.




• Any dispute including a commercial dispute, in which CG or
  state government or its agencies, public bodies, corporations and
  local bodies is a party, the settlement agreement shall be signed
  after obtaining the prior written consent of the competent
  authority of such government.

Conclusion

Until recently, India did not have a specific law solely
dedicated to resolving disputes through mediation. Thus, the
enactment of the Act, which mandates pre-litigation mediation,
represents a significant step toward reducing the backlog of cases
within the Indian legal system and facilitating the timely
resolution of disputes. The Indian Institute of Arbitration and
Mediation offers alternative dispute resolution
(‘ADR’) services, including international
and domestic commercial arbitration, mediation, and training
programs in ADR. In summary, the Act is transformative in the field
of dispute resolution. It not only modernizes the approach to
resolving conflicts but also meets the evolving needs of
individuals and businesses. Challenges to the MSA are limited to
instances of fraud, corruption, impersonation, or if the subject
matter of the disputes was not appropriate for mediation, as
stipulated by s. 6 of the Act.

Footnotes

1. Section 12A of the Commercial Courts
Act, 2015.

2. M/s Patil Automation Private Limited
and Ors. v. Rakheja Engineers Private Ltd. SLP (C) No. 14697 of
2021.

3. Notification No. CG-DL-E-15092023-248775

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