Mediation, as a means of alternative dispute resolution, has gained significant prominence in India over the years. In a major step towards formalising and regulating the mediation process in the country, on 15-9-2023, the Mediation Act, 2023 (Act) was notified.

The Act defines mediation as “… 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….”

Applicability of the Act

The Act applies to mediation conducted in India and where (i) all or both parties reside/are incorporated in India; (ii) the mediation agreement provides that any dispute shall be resolved in accordance with the Act; (iii) international mediation; (iv) where the Government is a party to a commercial dispute; or (v) to any other dispute if notified where the Government is a party.

Prominent features of the Act

The Act provides a comprehensive framework to regulate mediation and offers multiple benefits inter alia by aiding in the reduction of court case backlog, offering cost-effective dispute resolution mechanism to the stakeholders, ensuring confidentiality, encouraging party autonomy, voluntary participation and enhancing credibility. The prominent features are discussed below:

(i) Institutional mediation: The Act encourages the establishment of mediation service providers to administer mediation proceedings between the parties. The mediation service providers are expected to perform the following functions, namely:

(a) accredit mediators and maintain panel of mediators;

(b) provide the services of mediator for conduct of mediation;

(c) provide all facilities, secretarial assistance and infrastructure for the efficient conduct of mediation;

(d) promote professional and ethical conduct amongst mediators;

(e) facilitate registration of mediated settlement agreements; and

(f) such other functions as may be specified.

(ii) International mediation: The Act defines international mediation as mediation undertaken under the Act relating to a commercial dispute arising out of a legal relationship, contractual or otherwise, under any law for the time being in force in India, and where at least one of the parties, is (a) an individual who is a national of, or habitually resides in, any country other than India; or (b) a body corporate including a limited liability partnership of any nature, with its place of business outside India; or (c) an association or body of individuals whose place of business is outside India; or (d) the Government of a foreign country. The Act emphasises that the Mediation Council of India, which will be established under this Act, ought to endeavour to promote international mediation through appropriate guidelines.

(iii) Online mediation: Online mediation including pre-litigation mediation may be conducted at any stage of mediation under the Act, with the written consent of the parties including by the use of electronic form or computer networks, but not limited to an encrypted electronic mail service, secure chat rooms or conferencing by video or audio mode or both.

(iv) Court-annexed mediation: To facilitate the integration of mediation into the Indian legal system, the Act introduces the concept of court-annexed mediation. This allows courts to refer cases to mediation, particularly those that they deem suitable for alternative dispute resolution.

(v) Time-frame: Mediation under the Act is to be completed within a period of 120 days from the date fixed for the first appearance before the mediator and such period for mediation may be extended for a further period as agreed by the parties, but not exceeding 60 days.

(vi) Mediated settlement agreement: A mediated settlement agreement includes an agreement in writing between some or all of the parties resulting from mediation (including online mediation), settling some or all of the disputes between such parties, and authenticated by the mediator, provided that the terms of the mediated settlement agreement may extend beyond the disputes referred to mediation.

(vii) Confidentiality and consent: Mediation proceedings are confidential, and parties must consent to participate voluntarily. The confidentiality clause encourages open and honest discussions, as parties can share information without fear of it being used against them in court.

(viii) Enforcement of mediated settlement agreement: A mediated settlement agreement resulting from a mediation signed by the parties and authenticated by the mediator is final and binding on the parties and is enforceable as if it were a judgment or decree passed by a court.

(ix) Challenge to mediated settlement agreement: A mediated settlement agreement can only be challenged on the limited grounds of fraud, corruption, impersonation, or where the subject-matter of dispute is excluded under the Act.

(x) Mediation Council of India: The Act establishes the Mediation Council, a regulatory body responsible for setting standards, accrediting mediators, and maintaining a repository of accredited mediators. The Mediation Council aims to play a crucial role in ensuring the quality and professionalism of mediators in India.

Implications and challenges

While the Act represents a significant step forward in promoting mediation as a primary method of dispute resolution, it also faces challenges such as:

(i) The absence of a comprehensive framework for international mediation within an Act may not necessarily render the concept ineffective, but it can create ambiguity and limit its practical applicability. Therefore, it is essential to develop and implement a detailed framework to support the effective use of international mediation in resolving international disputes.

(ii) While international mediation has been introduced, however, the Act does not provide for a framework to enforce the mediated settlement agreements from cross-border mediations conducted outside India.

(iii) The Act stipulates that unless otherwise agreed by the parties, all costs of mediation, including the fees of the mediator and the charges of the mediation service provider shall be borne equally by the parties. Parties engaging in mediation may need to rely on their own agreements or, if available, any mediation rules or guidelines provided by the mediation service provider to address issues related to cost transparency.

(iv) Apart from the above, the challenges include the need for robust mediator training programs, public awareness campaigns, and overcoming cultural resistance to change.

Comments and way forward

In light of the Government’s proactive measures to promote mediation in India, it is evident that significant strides have been made towards enhancing dispute resolution mechanisms. The Act provides legal support to mediation as an alternative dispute resolution mechanism. The fact that government bodies have been included, will provide significant impetus to departments concerned, resolving disputes through mediation, thereby saving costs as well as time. The wide applicability of the Act to even include government bodies indicates a change in mindset against lengthy litigation and towards effective alternative dispute resolution. Enforceability of the mediated settlement agreements will provide comfort to parties on the effectiveness of mediation. Ultimately, the success of the Act depends on parties and practitioners effectively adopting mediation as their primary tool of alternative dispute resolution.

†Partner, Khaitan & Co.

††Principal Associate, Khaitan & Co.

†††Senior Associate, Khaitan & Co.

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