On 15th September, 2023, the Government of India enacted the “Mediation Act 2023” (the “Act”) which aims “to promote and facilitate mediation” with a particular emphasis on institutional mediation, community mediation and online mediation. Mediation, as defined by the Act, is a non-adversarial method of Alternate Dispute Resolution (“ADR”), whereby parties attempt to reach an amicable out-of-court settlement of their dispute with the assistance of a neutral third person referred to as a mediator. The Act seeks to boost the ADR mechanism in India by institutionalizing and standardizing the mediation process. In a highly litigious country like India, the development of mediation as an efficient tool to reduce the pendency of cases before conventional courts in a flexible and cost-effective manner is vital for the progress of dispute resolution.
This paper reviews key provisions of the Mediation Act, 2023 to gauge its potential to either enhance or hinder the dispute resolution process in India. To this effect, this paper will – first, explore the contextual foundations of the Act, delving into the history of legislative and judicial support for mediation in India and the necessity of having a separate legislation. Secondly, the paper embarks on a normative analysis of four key provisions of the Mediation Act – (i) definition (ii) voluntary pre-litigation mediation (iii) applicability and (iv) enforcement of the mediated settlement agreement vis-à-vis perspectives from stakeholders and important judgments.
Prior to the Act, mediation lacked an overarching legislative framework. Unlike other ADR methods such as arbitration and conciliation which were regulated by the Arbitration and Conciliation Act of 1996, mediation’s legal foundation was rather scattered throughout various enactments and judicial precedents.
Legislative provisions on Mediation prior to The Mediation Act, 2023
The Code of Civil Procedure (Amendment) Act, 1999, which inserted Section 89 to The Code of Civil Procedure, 1908 (“CPC”) empowered civil courts to refer civil disputes that contained “elements of a settlement which may be acceptable to the parties” to be settled out of court. The section lists four options for alternate dispute resolution, one of those being mediation.
Courts were also empowered to refer cases to mediation was by way of special legislations. For instance, Section 442 of The Companies Act, 2013, provides that a “Mediation and Conciliation Panel” be maintained by the Central Government for the mediation of cases before the Central Government or the National Company Law Tribunal (“NCLT”) or National Company Law Appellate Tribunal (“NCLAT”). At the same time, Section 442(2) also allows any of the parties to the proceedings to apply for referral of the matter for mediation before the Mediation and Conciliation Panel.
Similarly, the Consumer Protection Act, 2019 (“CPA”) has several provisions enabling mediation of consumer disputes. Section 37 of the CPA prescribes that the District Commission may direct the parties to settlement by mediation at the first hearing or any later stage if it appears that “there exists elements of a settlement which may be acceptable to the parties”. Additionally, Chapter V of the CPA contains provisions concerning the establishment of consumer mediation cells attached to the District Commissions and the State Commissions (Section 74) and the procedure for mediation in consumer disputes (Section 79) among others.
In 2018, an amendment to The Commercial Courts Act, 2015 inserted Section 12A which provided for pre-institution mediation and settlement. The Section mandates that the disputing parties attempt mediation before instituting a suit in the Court.
Judicial support for Mediation
In Salem Advocate Bar Association v Union of India, (2003) 1 SCC 49 (“Salem I”), the Supreme Court of India acknowledged that there was insufficient case management in place to give effect to the methods envisaged in Section 89 of the CPC and that “modalities needed to be formulated” for effective implementation of the ADR methods outlined in Section 89.
However, the landmark judgment that brought mediation to the limelight was Salem Advocate Bar Association v Union of India, (2005) 6 SCC 344 (“Salem II”) where the Court adopted the principle of purposive construction to uphold the validity of the Amendment Act of 1999 inserting Section 89 to the CPC. Pursuant to this case, the Apex Court constituted a Mediation and Conciliation Project Committee (MCPC) to “oversee the effective implementation of Mediation and Conciliation” in India. The Committee drafted the Model Rules, 2003 which served as the guiding light for various High Courts in framing their own mediation rules.
Notably, in M.R. Krishna Murthi v. New India Assurance Co. Ltd, (2019) 15 SCC 493, a more recent case involving a road accident, the Supreme Court of India recognized the increasing significance of the mediation process and observed that “there is a dire need to enact an Indian Mediation Act”.
The aforementioned judgments showcase that the higher judiciary generally held a favourable disposition towards the practice of mediation, underlining the need for a dedicated mediation legislation. Additionally, India’s international commitments, including signing the Singapore Convention on Mediation, formally the ‘United Nations Convention on International Settlement Agreements Resulting from Mediation’ or ‘UNISA’ in 2019 also reinforced the need for a comprehensive mediation law. It is in this context that the Mediation Act, 2023 was passed to consolidate and give effect to this general attitude of support for mediation. The following section delves deeper into analyzing three key aspects of the Act.
Analysis of key provisions of “The Mediation Act, 2023”
Definition of ‘Mediation’
The Act defines Mediation as “a process whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person referred to as a mediator, who does not have the authority to impose a settlement upon the parties to the dispute.” It also expands the scope of mediation to statutorily recognize pre-litigation mediation, online mediation, community mediation and conciliation under the definition of ‘mediation’. The subsuming of conciliation within mediation is in line with the international practice of using the terms ‘mediation’ and ‘conciliation’ interchangeably as declared by the UNCITRAL and as done previously by the Supreme Court of India in many of its judgments (see Perry Kansagra vs. Smriti Madan Kansagra (MANU/SC/0220/2019) and Amardeep Singh vs. Harveen Kaur (MANU/SC/1134/2017)). This also has an implication for other legislations. Part III of the Arbitration and Conciliation Act, 1996 (The “A&C Act”) is thus rendered superfluous and consequently, the Mediation Act seeks to amend the provisions on conciliation from the A&C Act via Section 61 and the Sixth Schedule of the Act.
Voluntary Pre-Litigation Mediation
Section 5 of the Mediation Act provides that the disputing parties, before filing any civil or commercial suit in any court, may “voluntarily and with mutual consent” take steps to settle the disputes by pre-litigation mediation. Interestingly, while the initial version of the Mediation Bill, 2021 had proposed to make pre-litigation mediation mandatory, the Parliamentary Standing Committee’s recommendation to make it voluntary has been accepted. This pivotal aspect of the Act has emerged as a highly contentious issue, leading to a divergence of opinions within the legal fraternity as to whether voluntary mediation should have been replaced with mandatory mediation, as was envisaged in the Original Bill.
Those in favour of voluntary mediation contend that mandating pre-litigation mediation would have undermined the very purpose of the legislation. Their apprehension is that mandating mediation would have infringed upon a fundamental tenet of mediation – voluntariness of the parties and is thus, tantamount to denial of access to justice. A NGO consulted by the Standing Committee on The Mediation Bill, 2021 raised further apprehensions about the practicality of making mediation mandatory given the scarcity of trained mediators. Concerns have also been raised on the ‘coercive’ nature of mandatory mediation to unduly impose costs on parties who are not even willing to mediate. Arguments on this side are summed up by Vettori’s bold contention that mandatory mediation is the “antithesis of mediation and that, therefore, it denigrates the process”.
The contrarian view is that mandating an initial attempt at mediation significantly increases the number of settled disputes, thus leading to quick and effective justice. Some authors have argued that mediation should be made mandatory only for certain categories of disputes, and that too, in a phased manner. In its research findings, whilst noting the success of the ‘opt-out model’ of mandatory pre-litigation mediation in Italy, Brazil and Turkey, NITI Aayog recommended gradually rolling out mandatory pre-litigation mediation in a phased manner, first for certain categories of disputes and then eventually to cover a wider range of disputes.
Applicability of the Act to specific disputes
Yet another contentious matter revolves around disputes deemed inappropriate for mediation in The First Schedule of the Act. The following section details the intricacies of the exclusion of two groups of disputes – criminal disputes and non-commercial disputes where the Government is a party, from the ambit of the Act.
Mediation in Criminal Disputes
Section 6 of the Act read in conjunction with Entry 3 of The First Schedule excludes disputes involving criminal offences from the ambit of mediation. This provision seems to be in conflict with the latest judicial precedents. In K. Srinivas Rao v. D.A. Deepa ((2013) 5 SCC 226), whilst dealing with a divorce matter, the Supreme Court of India noted that criminal courts could also refer to mediation cases where a complaint has been filed under Section 498-A of The Indian Penal Code (‘IPC’) 1860. Similarly, in Ayyasamy v. A. Paramasivam & Ors., (2016) 10 SCC 386, the Apex Court again held a pro-arbitration approach by holding that mere allegations of fraud, a criminal offence under the IPC, does not make the dispute non-arbitrable. The Courts, on both occasions, differed from established precedents by laying down a general reasoning that unless the case involves the commission of a serious criminal wrongdoing, there is no reason to disallow the referral of the case to arbitration. This is especially true for compoundable offences like theft, fraud, criminal defamation etc., where the complainant can agree to take back the charges levied against the accused, if done in a bona fide manner. In the recent Delhi High Court judgment of Yashpal Chaudhrani & Ors. v State, the Court advocated for referring criminal cases to mediation involving compoundable offences, given that there is proper scrutiny of the admissibility of the case with reference to the High Court’s powers under Section 482 of the Code of Criminal Procedure (“CrPC”). Hence, Courts have generally held a favourable disposition towards referring cases involving compoundable offences to mediation. It was expected that the Mediation Act would institutionalize this custom to ensure uniformity and justice.
However, the Act seems to have followed the older precedent in Booz Allen and Hamilton Inc. v SBI Home Finance Limited (2011) 5 SCC 532 where the Supreme Court adopted a restrictive view on the admissibility of criminal cases for mediation by holding that disputes arising out of criminal offences would be non-arbitrable in nature, even if the parties showed their willingness to mediate.
Mediation of non-commercial disputes involving the Government
It is also pertinent to note a slight change in the Application Clause (Section 2) of the Act vis-à-vis the initial Bill. The Mediation Bill, 2021 had restricted the ability of the Central and State Government to participate in mediation proceedings arising only out of “commercial disputes” which drew a lot of flak from stakeholders. Some lawyers argued that since the Government is the biggest litigant in the country, the exclusion of non-commercial disputes involving the government or any other body controlled and owned by the government from the ambit of the Bill would go against the very objective of enacting the legislation. The Standing Committee on the Bill also echoed these concerns and recommended some modification in the wording of the Bill.
The final Act, however, indicates a half-hearted attempt to heed to these suggestions. A closer reading of Section 2 of the Act reveals that applicability of the Act still doesn’t extend to any and all non-commercial disputes wherein, one of the parties is the Central Government or a State Government or a body controlled by the government. The proviso in Section 2(v) provides that The Act would only apply to the dispute if it is “deemed appropriate and notified” by the Government. In essence, this is similar to the position in the Original Bill which gives unbridled power to the government to notify “any other kind of dispute” fit for mediation. It has been argued that this proviso is “legally untenable and hit by the doctrine of excessive delegation”. The Government seems to have surreptitiously induced changes in the Application Clause of the Bill, whereas in essence, it remains the same.
Enforcement of the Mediated Settlement Agreement
As per Section 27 of the Act, a Mediated Settlement Agreement will be “final, binding and enforceable on the parties in the same manner as if it were a judgment or decree passed by a court”.
Prior to the Mediation Act, there existed a lot of ambiguity on the enforcement of mediated settlements. In Afcons Infrastructure Ltd v Cherian Varkey Construction Co (P) Ltd (2010) 8 SCC 24, the Supreme Court of India held that the Court-initiated mediation proceedings shall be deemed as Lok Adalat and hence settlements reached through such proceedings are enforceable as if a decree of the Court under S. 21 of Legal Services Authorities Act, 1987. However, a lacuna seems to have existed when it came to mediation proceedings which were not initiated by the Court. In such proceedings, settlements could only have been enforced as a contract between the parties. Section 27 does away with this distinction between court-initiated and non- court-initiated mediation through a sweeping move including all valid settlement agreements arising out of mediation within its ambit.
Also, in including Section 27, the Government seems to have partially given effect to the spirit of The Singapore Convention which envisages the establishment of a harmonious international legal framework for the promotion of Mediation. However, it is important to clarify that Section 27 does not apply to settlements arising out of mediations conducted abroad. This is inconsistent with the requirements of the UNISA and may impede efforts to make India a robust hub for International Commercial Mediation, as envisaged by the Act. Experts deposing before the Standing Committee unanimously recommended incorporating the provisions of the UNISA within the Mediation Act which would thus, amount to formal ratification of the UNISA by India.
The Mediation Act, 2023 thus, represents a significant step forward in the promotion of Mediation as a dispute resolution mechanism in India. While it introduces key provisions related to voluntary pre-litigation mediation and strengthens the enforcement of mediated settlements, it also raises critical questions and concerns. Moreover, the Act serves as a commendable foundation for future legislation on mediation, providing a starting point for further refinement and development of mediation practices in the Indian legal landscape. However, on a conclusionary note it must be clarified that there is a lot more to the Act, apart from the aspects analysed above.
(This article has been authored by Samik Basu, a student at National Law School of India University, Bangalore)