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Mediation Act, 2023

  • Published
    23rd Sep, 2023

Delay in Justice and overburdened courts in India have pushed for Alternate Dispute Resolution (ADR) and mediation laws which will help to resolve disputes without court involvement.

Alternate Dispute Resolution (ADR):

  • Alternate dispute resolution (ADR) refers to means by which disputes are settled outside the traditional court system.  In India, modes of ADR include arbitration, negotiation, mediation, and Lok Adalats.
About the Act:
  • Objective: The Mediation Act, 2023 aims to foster a link between the mediation and the arbitration of commercial disputes, thus reducing the burden on Indian courts.
  • The Act makes participation in pre-litigation mediation mandatory.
  • The Mediation Council, established to regulate the profession of mediators, may not have representation of practising mediators with adequate experience.
  • The Mediation Council requires prior approval from the central government before issuing regulations related to its essential functions.
  • The Act applies to international mediations only if they are conducted in India.
  • It does not provide for enforcement of settlement agreements resulting from international mediation conducted outside India.
  • Applicability: The Bill will apply to mediations conducted in India:
    • Involving only domestic parties,
    • Involving at least one foreign party and relating to a commercial dispute (i.e., international mediation), and
    • If the mediation agreement states that mediation will be as per this Bill.
    • If the central or state government is a party, the Bill will apply to: (a) commercial disputes, and (b) other disputes as notified.

What is Mediation?

  • Mediation is a voluntary dispute resolution process. The question is whether it is appropriate to mandate parties to attempt pre-litigation mediation.   On one hand, this could lead to more out of court settlements and reduce the pendency in courts.  On the other hand, mandating mediation goes against its voluntary nature.
  • The mediation process depends on the choice of parties, and there are no strict or binding rules of procedure.
  • Benefits of mediation include;
    • It is voluntary and non-adversarial in nature,
    • Its flexibility and confidentiality of the process,
    • Its speed and cost effectiveness, and
    • Finality of consensual settlements
  • As a mode of ADR, mediation may also help reduce the case burden on courts.

Provision under the Act:

  • Pre-litigation mediation: Parties must attempt to settle civil or commercial disputes by mediation before approaching any court or certain tribunals. Even if they fail to reach a settlement through pre-litigation mediation, the court or tribunal may at any stage refer the parties to mediation if they request for the same.
  • Mediation process: Mediation proceedings will be confidential, and must be completed within 180 days (may be extended by 180 days by the parties). A party may withdraw from mediation after two sessions.  Court annexed mediation must be conducted as per the rules framed by the Supreme Court or High Courts.
  • Mediators: Mediators may be appointed by: (i) the parties by agreement, or (ii) a mediation service provider (an institution administering mediation). They must disclose any conflict of interest that may raise doubts on their independence.  Parties may then choose to replace the mediator.
  • Mediation Council of India: The central government will establish the Mediation Council of India. The Council will consist of a chairperson, two full-time members (with experience in mediation or ADR), three ex-officio members (including the Law Secretary, and the Expenditure Secretary), and a part-time member from an industry body.  Functions of the Council include: (i) registration of mediators, and (ii) recognising mediation service providers and mediation institutes (which train, educate, and certify mediators).
  • Mediated settlement agreement: Agreements resulting from mediation (other than community mediation) will be final, binding, and enforceable in the same manner as court judgments.
  • They may be challenged on grounds of: (i) fraud, (ii) corruption, (iii) impersonation, or (iv) relating to disputes not fit for mediation.
  • Community mediation: Community mediation may be attempted to resolve disputes likely to affect the peace and harmony amongst residents of a locality. It will be conducted by a panel of three mediators (may include persons of standing in the community, and representatives of resident welfare associations).

Present laws supporting Mediation:

At present, mediation in India may be:

  • Court referred (courts may refer cases to mediation under the Code of Civil Procedure, 1908),
  • Private (for instance, under a contract having a mediation clause), or
  • As provided under a specific statute (such as the Commercial Courts Act, 2015, the Consumer Protection Act, 2019, or the Companies Act, 2013).
  • Provided By:
    • Mediation services are provided by private ADR centres or mediation centres, as well as centres set up by courts or tribunals (known as court annexed mediation centres).

Various countries including Australia, Singapore, and Italy have standalone laws on mediation.

Which disputes are being excluded?

  • Disputes not fit for mediation: The Bill contains a list of disputes which are not fit for mediation. These include disputes:
    • Relating to claims against minors or persons of unsound mind,
    • Involving criminal prosecution, and
    • Affecting the rights of third parties.
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