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Mediation in India is becoming increasingly popular amongst the disputing parties owing to its less-time consuming and cost effective factor. Mediation is a process where the parties voluntarily sit on a table to negotiate and resolves their disputes under the guidance of a Mediator. With a view to reduce pendency of cases, even the courts in India are highly bent towards the use of mediation by the parties to mutually resolve their disputes. Mediation has often proved to be beneficial for the parties and it is for this reason that mediation in commercial disputes has now become mandatory by way of an amendment to the Commercial Courts, Commercial Division and Commercial Appellate Division of the High Courts Act 2015.Since a long time now, various rules and regulations have been in place pertaining to the conduct and procedure of mediation endorsed by courts in India. Therefore, a party may find it difficult to comprehend and understand that Mediation rules applicable on them.
We have therefore compiled all the information pertaining to Mediation and have attempted to simplify it in the manner below:
The parties to a dispute can opt for mediation at any stage and are under no mandatory obligation to go through the procedure of Mediation. Choosing mediation as a mode to resolve the dispute in question is a voluntary decision and cannot be forced upon under any circumstances. The Commercial disputes, however, have to mandatorily undergo the mediation process owing to a 2018 amendment to the Commercial Courts Act 2015.Section 12A of the Commercial Courts Act, 2015 has made the pre-institution mediation mandatory before institution of a suit. The Commercial Courts (Pre-Institution Mediation and Settlement) Rules 2018 (the PIMS Rules) have been framed by the government. By virtue of these rules, before the trial begins in a suit, the parties have to mandatorily undergo pre-institution mediation. Settlements arrived at in this process are enforceable by law.
In India, parties are at liberty to mutually decide upon a Mediator to mutually resolve their legal and contractual issues, however, in case of failure of consensus, a mediator is appointed from the panel of mediators registered with the High Court as well as the District Courts, as the case may be.
Mediation as a concept of Alternate Dispute Resolution is prevalent in India in two forms namely Private Mediation and Court Annexed Mediation. Both the forms of mediation have their pros and cons.It cannot be stated for sure which form of mediation is mostly preferred by the parties due to lack of any clear data or record in this regard. However, the inclination seems to be towards Court annexed mediation, for which the respective High Courts have their own set of Rules. For instance, in Delhi, Mediation and Conciliation is governed by Mediation & Conciliation Rules 2004. Furthermore, Mediation in Delhi is conducted through the Mediation Centres established in each of the District Courts as well as at the High Court level.
Mediation is an alternative method of amicably resolving disputes without resorting to Courts. It is an informal, party-centred and structured negotiation process where the parties to the dispute have an opportunity to express their grievances, feelings and interests with the assistance of a mediator. A neutral third party serves as a mediator and facilitates communication and negotiation between the parties to work out innovative mutually agreed solutions to meet their interests.
The mediator acts as a facilitator. The role of the mediator is to create an environment in which parties before him are facilitated towards resolving the dispute in a purely voluntary settlement or agreement. The mediator cannot adjudicate like a judge or arbitrator neither delivers judgment nor dictates to the parties the terms of the agreement. Being a neutral/impartial third party, the function of the Mediator is to enable the parties to arrive at a self designed solution or evaluate the claims using his legal and commercial expertise.
The concept of mediation finds place in different acts, however, it received legislative recognition in India for the first time in the Industrial Disputes Act, 1947.
Section 4 of Industrial Disputes Act, 1947, stipulates that conciliators appointed are assigned with the duty to mediate and promote settlement of industrial disputes with detailed prescribed procedures for conciliation proceedings.
Section 89 and Order X Rule 1A Code of Civil Procedure 1908 was inserted through an Amendment Act of 1999. This provision empowers the court to direct the parties to opt for any of the five modes of the Alternate Dispute Resolution (“ADR”) and refer the case for arbitration, conciliation, judicial settlement including settlement through Lok Adalat or mediation.
Civil Procedure Mediation Rules, 2003 contains provision for mandatory mediation under Rule 5(f)(iii). As per this Rule, when one party applies to the court for mediation or conciliation, the court after hearing all the parties, can refer the matter for mediation without the consent of all the parties. However, this reference can be made only when the court is satisfied that there exists elements of settlement and there is a relationship between the parties which has to be preserved.
Section 12 of Commercial Courts Act, 2015 requires parties to exhaust the remedy of pre-institution mediation before institution of a commercial suit. The said pre-institution mediation has to be conducted by the authority constituted under the Legal Services Authorities Act, 1987 and has to be in conformity with the Commercial Courts (Pre-intsitution Mediation and Settlement) Rules, 2018. In case the parties successfully arrive at a settlement, it would be enforceable as an award under the Arbitration and Conciliation Act, 1996.
Section 442 of the Companies Act, 2013 read with the Companies (Mediation and Conciliation) Rules, 2016 provides that the Central Government shall maintain a panel of experts consisting of such number of experts, having such qualifications, as may be prescribed for mediation between the parties during the pendency of any proceedings before the Central Government or the Tribunal or Appellate Tribunal under this Act.
Sections 37-38 and Chapter V of the Consumer Protection Act, 2019 read with Consumer Protection (Mediation) Rules, 2020 provides for disputes covered under this Act to be first referred to mediation. It has been clearly provided under Section 37 (1) of the Act that at first hearing of a complaint after its admission or at any later date, if it appears to the District Commission that there exist elements of a settlement which may be acceptable to the parties, it may direct the parties to give in writing within 5 days, their consent to refer the matter to mediation and the provisions of Chapter V of this Act shall apply.
Litigation is a judicial adjudicatory process where a third party is appointed as the judge/officer to decide the outcome and the parties must accept that decision. The decision of the Court ends in decrees and orders and is appealable.
Arbitration is quasi judicial adjudicatory process where the arbitrator is appointed by the Court or by the parties to decide the dispute. Arbitral proceedings end in Awards which can be objected and challenged on specific grounds by the Award-debtor.
Per Contra, in Mediation parties are encouraged to explore various mutually acceptable solutions to end their dispute with the assistance of the Mediator. It is a party’s voluntary resolution, not the Court's decision. However, when parties come to a settlement in Court-annexed Mediation, the Court endorses the settlement by a granting a judicial decree.
As per Indian domestic law, mediation and conciliation are not synonymous. In India, conciliation is governed by Part III of the Arbitration Act, 1996 which makes the settlements enforceable as ‘consent awards. In the case of Angle Infrastructure Pvt Ltd v Ashok Manchanda &Ors: 2016(2) Arb. LR 394 (Delhi), the Delhi High Court has held that a settlement arrived through mediation is not covered within the ambit of Section 74 of the Arbitration and Conciliation Act, 1996.
However, in practice conciliation blends with mediation as the differences between mediation and conciliation are essentially of degree rather than of kind.
The Supreme Court in the case of Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd: (2008) 10 SCC 24, has specifically identified the following case types as being suitable for ADR:
The following categories of cases are normally considered to be not suitable for ADR process having regard to their nature :
Mainly three types of mediation models are followed in India :
There are three types of mediation -
If there is a built-in Mediation clause in the agreement, one party can contact the other party and refer the disputes to Mediation provided the other party is not averse to the idea of Mediation.
The parties can also go through an Institute or Centre for Mediation. For instance, the Delhi High Court has established the Delhi High Court Mediation and Conciliation Centre, known as “Samadhan” which functions in accordance with Mediation and Conciliation Rules, 2004. These Rules apply to all Mediation and Conciliation connected with any suit or other proceedings pending in the High Court of Delhi or in any court subordinate to the High Court of Delhi. The Courts can initiate Mediation by passing an order in a pending litigation with the consent of parties to try Mediation in cases it considers fit and appropriate.
Every stage of the trial is fit for mediation. Cases which are fixed at framing of issues, miscellaneous proceedings, evidence, and arguments get settled through mediation.
Generally, the appropriate stage for considering reference to ADR processes is after the completion of pleadings. However, in family disputes or matrimonial cases, the ideal stage for mediation is considered to be immediately after service to the respondent and before the respondent files objections/written statements, as the relationship becomes hostile on account of the various counter allegations.
In private mediations the parties can select their Mediators by consent. However, cases where Mediation is directed by a Court for instance in the Delhi High Court, the Mediator/s is/are appointed by the Court itself. Alternatively, upon reference by the Court, the Delhi High Court Mediation and Conciliation Centre appoints the Mediator/s from its panel of trained and experienced Mediators, who are members of the Delhi High Court Bar Association.
Mediation is less expensive, confidential, improves communication, saves times, preserves relationship, avoids litigation and creates a win-win situation for the parties.
No. Mediation does not affect legal rights of the parties in any way and parties can avail of Mediation before filing a case in Court or at any stage of their litigation in Court, as the process is completely confidential and cannot be used as evidence before Court. Hence, if Mediation fails, the rights of the parties before the Court remain intact.
No. Unlike the Judge or an arbitrator, the mediator is neither a trier of facts nor an arbiter of disputes. The Mediator functions neutrally to enable the parties to arrive at a mutual and voluntary agreement. In case, no settlement is arrived, the Mediator informs the Court of the failure to settle without giving any reasons.
Order XXIII Rule 3 of CPC formulates the procedure of providing a legal seal to the adjustments arrived at by the parties by passing a decree in consonance with the terms of such adjustment and such decree is known as “Compromise Decree” which grants enforceability to the settlement.
It is clarified that such decrees are not appealable, however, can be further enforced by way of Contempt petition.
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