India: Will The Mediation Act 2023 Reshape Alternative Dispute Resolution In India

Introduction

Mediation has been a part of India's dispute resolution landscape and several Indian statutes, such as the Arbitration and Conciliation Act, 1996, the Code of Civil Procedure, 1908, the Commercial Courts Act, 2015, have recognized mediation as a means of alternative dispute resolution, but there was no standalone legislation governing the conduct of mediation in India. In order to remove the inconsistencies in several existing legislations, the Central Government vide notification¹ dated September 14, 2023, notified the Mediation Act, 2023 ("Act") with the aim to promote and facilitate mediation² for resolution of disputes in a time bound manner and enforce mediated settlement agreements in a cost-effective manner. In this article, we discuss and analyze some of the key aspects of the Act and its potential for an amicable dispute resolution in India.

Key Provisions of the Act

Applicability: The Act is applicable to (i) mediations being conducted in India and (ii) where all or both parties habitually reside in or are incorporated or have their place of business in India; or the mediation agreement provides that the dispute would be resolved as per the provisions of the Act; or there is an international mediation; or there is a commercial dispute where one of the parties is a government or a government entity; or to such other government disputes as may be notified.

India is a signatory to the United Nations Convention on International Settlement Agreements Resulting from Mediation (popularly known as Singapore Convention on Mediation) which provides for the enforcement of mediated settlement agreements in the courts of the home country of the counter party, but the Act has not included within its purview the enforcement of mediated settlement agreements where such mediations are conducted outside of India. Thus, the Act has missed the opportunity to allow enforcement of mediated settlement agreements reached between parties outside of India.

Exclusions: Unlike the Arbitration & Conciliation Act, 1996, where issues related to non-arbitrability of disputes has not been specified, the First Schedule of the Act prescribes an indicative list of matters which are deemed unfit to be resolved by mediation, such as matters pertaining to, prosecution for criminal offences; levy, collection, penalties or offences, in relation to any direct or indirect tax or refunds; proceedings under the Competition Act, 2002, Securities and Exchange Board of India Act, 1992; non-commercial disputes by or against the government; land acquisition and determination of compensation under land acquisition laws and any other subject matter of dispute which may be notified by the Central Government.

The Act also does not apply to disputes that affect the rights of a third party who are not a party to the mediation proceedings, except only in matrimonial disputes where the interest of a child is involved.

Mediation in Criminal Disputes: While the First Schedule to the Act excludes prosecution of criminal offences from the ambit of mediation, the Act enables a court to refer any dispute relating to compoundable offences including the matrimonial offences to mediation. In such a case, the outcome of mediation will not be deemed to be a judgment or decree of court and the mediation outcome must be considered by the court.

Eligibility of Mediators: The Act defines mediator as a person (of any nationality) who is appointed under the Act to be a mediator, by the parties, or by a mediation service provider, and includes a person registered as mediator with the Mediation Council of India ("MCI") as may be established by the Central Government.

Appointment of Mediators: The Act recognizes the autonomy of the parties to decide the procedure and to appoint any person as a mediator. For this, parties may enter into a written agreement to mediate either before or after the dispute arises. In case the parties fail to reach an agreement, then the party initiating the mediation can make an application to a mediation service provider for the appointment of a mediator.

Similar to the appointment and disclosure regime applicable to arbitrators, the Act requires a person appointed to be a mediator to pre-disclose in writing to the parties regarding any circumstance or potential circumstance that may constitute any conflict of interest or that is likely to give rise to justifiable doubts as to his independence or impartiality as a mediator. Further, a mediator so appointed cannot act as an arbitrator or a counsel of a party in any arbitral or judicial proceeding which is subject matter of the mediation proceedings or be presented as witness in any proceeding.

Mediation Procedure: The Act enables the parties to voluntarily and with mutual consent opt for mediation before filing any suit or proceedings of civil or commercial nature in any court. However, the pre-litigation mediation in matters of commercial disputes of specified values would continue to be governed by the Commercial Courts Act, 2015 and the rules framed thereunder. Further, every mediation must be undertaken within the territorial jurisdiction of the court or tribunal of competent jurisdiction to decide the subject matter of dispute. However, the parties may by mutual consent agree to conduct mediation at any place outside the territorial jurisdiction of the court or tribunal, or by way of online mediation, and in such case the mediation shall be deemed to have been undertaken within the territorial jurisdiction of the court or tribunal of competent jurisdiction for the purpose of enforcement, challenge and registration of the mediated settlement agreement.

Despite recognizing that parties may voluntarily resort to mediation, the Act does stipulate a timeline for completion of mediation proceedings i.e., 120 (one hundred and twenty) days from the date fixed for the first appearance before the mediator, with a maximum extension of 60 (sixty) days.

Mediated Settlement Agreement: The Act defines a mediation settlement agreement as an agreement in writing entered between some or all the parties resulting from mediation, settling some or all the disputes between such parties, and authenticated by the mediator. Such an agreement is final and binding on the parties and shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a judgment or decree of a court.

The mediated settlement agreement may be challenged by a party by filing an application within a period of 90 (ninety) days from the date on which such party received a copy of the mediated settlement agreement on limited grounds of fraud, corruption, impersonation, or where the mediation was conducted in disputes falling within the First Schedule to the Act. The Act restricts the grounds for challenge which do not include grounds such as duress and coercion, or fraud which may discovered only after the expiry of the limitation period.

Non-Settlement Report: Where no settlement is reached to between the parties under mediation within the time-frame for concluding the mediation process, or if the mediator is of the opinion that the parties will not be able to reach to a settlement, the mediator is required to prepare a 'non-settlement report', without disclosing any details for the reasons thereof or about the parties' conduct in its report, and submit the same to the parties, or the mediation service provider, in case of institutional mediation. It may be noted that the Act protects the interest of the parties by excluding the time spent from commencement of mediation up to submission of non-settlement report (or up to the termination of mediation, as the case may be) while calculating the limitation period for any subsequent proceedings.

Confidentiality: The Act requires the mediator, mediation service provider, the parties and participants involved in the mediation process to maintain confidentiality with respect to all the matters pertaining to the mediation process and the parties are also not permitted to use any such material as evidence in any subsequent proceedings before a court.

Conclusion

Mediation process in India has finally been codified through the Act representing a significant milestone in the evolution of alternative dispute resolution in the country. Hopefully with the new enactment, mediation in India will gain legitimacy and credibility as a preferred method for resolving commercial, civil, and family disputes. By making the mediated settlement agreement binding and enforceable on parties, the Act has empowered parties to seek resolution through mediation with confidence, knowing that the outcomes can be legally binding and enforceable. This would further deter either party from unreasonably withdrawing from the terms of the settlement. Notably, the Act recognizes online mediation which can be resorted to at any stage of mediation with the written consent of the parties. It has also provided for community mediation with the prior consent of the parties for disputes relating to peace, harmony, and tranquility amongst residents or families. Even though the rules and regulations for the establishment and functions of MCI, recognition of mediation institutes and mediation service providers are awaited, it is believed that opting for mediation will significantly contribute to easing the burden on the overburdened judicial system by providing a faster, cost-effective, and less adversarial means of dispute resolution.

Footnotes

1. INotification No. CG-DL-E-15092023-248775, Ministry of Law and Justice, 2023, available at: https://egazette.gov.in/WriteReadData/2023/24 8775.pdf.

2. Section 3(h) "mediation" includes a process, whether referred to by the expression mediation, pre-litigation mediation, online mediation, community mediation, conciliation or an expression of similar import, whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person referred to as mediator, who does not have the authority to impose a settlement upon the parties to the dispute;

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