Introduction

The Indian Parliament, in August 2023, passed the Mediation Bill 2023 (Mediation Bill) to promote and facilitate mediation (especially institutional mediation) for amicable resolution of disputes. The bill is pending assent of the President of India. Mediation, as an alternate dispute resolution process, is not novel to the Indian legal system. At present, mediation in India can be (a) contractually provided for by a mediation clause in the contract; (b) referred by court under the Code of Civil Procedure, 1908; and (c) statutorily provided for in certain statutes such as Code of Civil Procedure, 19081, Commercial Courts Act, 2015 and Arbitration and Conciliation Act, 1996. But unlike countries like Australia, Singapore and Italy, India lacks a standalone law on mediation - the Mediation Bill intends addressing this gap. Below is our analysis of key aspects of the Mediation Bill and the challenges that we foresee in its implementation.

Key Pointers and Challenges

  1. Promotes Online and Institutional Mediation: The Mediation Bill intends to develop (and promote) institutional mediation in India, which is a positive step. A mediation service provider (such as an organization recognized by the Mediation Council or a court-annexed mediation center) conducts an institutional mediation, provides for mediators, infrastructure for the smooth conduct of mediation. Likewise, online mediation aims to make mediation cost-effective and easily accessible for the parties. This is also in-line with the Supreme Court's attempt to use technology to resolve issues of access to justice. Further, the Mediation Bill envisages international mediation between an Indian party and a foreign party in India. A foreign-seated mediation is not recognized under the Mediation Bill as of now.
  1. Voluntary and Not Mandatory: The Mediation Bill acknowledges that mediation is a voluntary dispute resolution process, and parties must not be compelled to choose (pre-litigation) mediation before approaching courts. Interestingly, the earlier version of the bill had mandatory pre-litigation mediation but now, the Mediation Bill permits the parties to mutually consent to pre-litigation mediation. This approach will be tested in coming days mostly because India's experiment with the pre-packaged insolvency resolution process, an informal understanding between the debtors and creditors of a corporate debtor before approaching the court, under the IBC has not met with the success expected so far. Therefore, it remains to be seen whether Indian litigants will voluntarily embrace mediation without any legislative incentive or sanction such as costs.
  1. Government as Litigant: The Mediation Bill excludes the government (including the State and Central Government and their agencies) from the mediation process except for commercial disputes. As on 17 March 2023, the Government is a party to 16,99,622 cases (including criminal) pending before various high courts of India and 3,18,47,225 pending before district courts. This is odd because if Government intends promoting mediation it must be an active participant in the process.
  1. Time Bound Mediation: The Mediation Bill proposes a time-bound mediation and mediation under the Mediation Bill must be completed within 180 days (including extension of 60 days) from the first appearance before the mediator. This is a good step but there is no option for extension beyond 180 days, if the parties fail to resolve the dispute within 180 days.
  1. Interim Protection: In a court referred mediation, the court can whilst referring the parties to mediation pass appropriate interim orders to protect interest of any party to the mediation- this is not available for pre-litigation mediation. Moreover, the nature and extent of court ordered interim protection lacks clarity. Ideally, this should be like section 9 of the Arbitration and Conciliation Act, 1996.
  1. Mediated Settlement Agreement to be Binding: On completion of a successful mediation, the parties must enter into a mediated settlement agreement (MSA), that will be final and binding on the parties, and enforceable like a judgment or decree passed by a court. An MSA can be challenged on limited grounds of (a) fraud; (b) corruption; (c) impersonation; and (d) dispute not fit for mediation. Any challenge to an MSA must be made within 90 days (extendable to a further 90 days subject to the satisfaction of the court) from the receipt of the MSA. This may pose difficulties if fraud is detected after 180 days, as court recourse by the aggrieved party becomes unclear.
  1. Exclusion of Disputes:Certain disputes or proceedings, affecting rights of a third party, proceedings under the Electricity Act, 2003, proceedings before SEBI and SAT under the Securities and Exchange Board of India Act, 1992, disputes involving prosecution for criminal offences, cannot be mediated. This is a helpful exclusion and provides clarity unlike the Arbitration and Conciliation Act, 1996, which provides no such statutory exclusion.
  1. Establishment of Mediation Council:The Mediation Bill proposes to establish the Mediation Council of India (MCI).MCI will primarily (a) promote domestic and international mediation in India; (b) formulate guidelines for the education, certification, and assessment of mediators by the recognized mediation institutes (which train, educate, certify mediators); (c) recognize, suspend or cancel such recognition of mediation institutes and mediation service providers; (d) maintain an electronic depository of the mediated settlement agreements made in India.
  1. Confidentiality of Mediation:The Mediation bill emphasizes on the confidentiality of the mediation process and the parties to a mediation including the mediator must keep confidential all (a) opinions, promises, proposals, admissions, apologies made during the mediation; (b) acceptance or willingness to accept a proposal; (c) documents for the mediation; and (d) any other mediation communication. Parties (including the mediator) must not maintain any audio or video recording of the mediation process (either in person mediation or online mediation).These confidential matters cannot be relied on or produced as evidence before any court or tribunal. This will encourage parties to explore mediation without any hesitation on disclosure (or misuse) of the settlement terms.

Conclusion

The Mediation Bill intends to streamline the mediation process, make it cost-effective and foster amicable resolution of the disputes. As of March 2023, there are 60,50,600 cases pending before high courts of India and 4,27,18,466 pending before district courts2. There is clearly a pressing need to unburden the courts and promote alternate dispute resolution processes, and so, the Mediation Bill is the right step in that direction. The Mediation Bill is also in line with the Singapore Convention on Mediation that India signed on 7 August 20193. But to develop a more conducive environment for parties to resolve their differences outside court, a statutory cost penalty must be imposed that disincentivizes litigation. Mediation without a cost underpinning is unlikely to work. Countries such as the United States, England and Singapore provide for adverse cost consequences in the event the conduct of a party is "unreasonable" in resolving disputes before recourse to the courts. In addition, both government and the judiciary must promote, train, and support mediation, if India is to unclog and improve its justice delivery system. At any rate, the Mediation Bill is a good start. Hopefully, in the fullness of time, the challenges and deficiencies in the working and experience of mediation under Indian conditions will be identified and addressed.

Footnotes

1. Section 89 of the Code of Civil Procedure, 1908.

2. Shri Kiran Rijiju, Minister of Law and Justice, answering a question in Lok Sabha on 17 March 2023.

3. https://www.singaporeconvention.org/jurisdictions

The above is a generic analysis and should not be regarded as a substitute for specific advice based on the facts of a client's objectives and specific commercial agreements reached. Please do reach out to us at mail@zba.co.in for any queries.