Legislation UpdatesRules & Regulations

The Central Government on 03-07-2018 has, in exercise of the powers conferred by sub-section (2) of Section 21A read with sub-section (1) of Section 12A of the Commercial Courts Act, 2015 (4 of 2016), notified the  Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018.

 

Key Highlights of the Rules are as follows :—

Initiation of mediation process —

(1) A party to a commercial dispute needs to make an application to the Authority as per Form-1 in Schedule-I, either online/by post/by hand, for initiating mediation process along with Rs 1000 as fees payable to the Authority by demand draft/ online;

(2) The Authority shall, having regard to territorial and pecuniary jurisdiction and nature of commercial dispute, issue notice, as per Form-2 in Schedule-I through registered/speed post and electronic means, i.e., e-mail and like to the opposite party for appearing and giving consent to participate in mediation process on a date not beyond ten days from issue of notice.

(3) If no response is received from opposite party either by post/e-mail, the Authority shall issue final notice as specified above.

(4) Where notice under sub-rule (3) is unacknowledged or opposite party refuses to participate in mediation process, the Authority shall treat the process to be a non-starter and make report as per Form 3 in Schedule-I and endorse it to both the parties.

(5) Where opposite party, after receiving the notice seeks further time for appearance, the Authority may, fix an alternate date not later than 10 days from date of receipt of such request.

(6) Where opposite party fails to appear on fixed date fixed, the Authority shall treat the mediation process to be a non-starter and make report as per Form 3 in Schedule-I and endorse the same to both the parties.

(7) Where both parties appear and give consent to participate in the mediation process, the Authority shall assign the commercial dispute to a Mediator and fix a date for appearance before the said Mediator.

(8) The Authority shall ensure that the mediation process is completed within 3 months from receipt of application for pre-institution mediation unless the period is extended for 2 months with consent of both the parties.

 

Venue for conducting mediation — The venue for conducting of the mediation shall be premises of the Authority.

 

Role of Mediator — The Mediator shall, on receipt of assignment, facilitate the voluntary resolution of commercial dispute and assist the parties in reaching a settlement.

 

Representation of parties — A party to a commercial dispute has to appear before the Authority/Mediator, either personally or through duly authorised representative/Counsel.

 

Procedure of mediation —

(1) The mediation shall be conducted as per the following procedure-

(i) At the commencement of mediation, the Mediator shall explain the mediation process to the parties;

(ii) The date and time of each mediation sitting should be fixed by Mediator in consultation with the parties.

(iii) The Mediator, during course of mediation, may hold meetings with parties jointly/separately;

(iv) The applicant/opposite party may share settlement proposals with the Mediator in separate sittings with specific instruction as to what part can be shared with the other party;

(v) Parties to the mediation can exchange settlement proposals with each other during mediation sitting either orally/in writing;

(vi) During the mediation process, Mediator has to maintain confidentiality of discussions made in separate sittings with each party and only the facts which a party permits can be shared with other party;

(vii) Once both parties reach to a mutually agreed settlement, same shall be reduced in writing by Mediator and signed by the parties and Mediator as per Form-4 in Schedule-I;

(viii) Mediator shall provide the settlement agreement, in original, to all the parties and also forward a signed copy to the Authority; and

(ix) Where no settlement is arrived between the parties within time specified in sub-section (3) of Section 12A of the Act or where Mediator is of the opinion that the settlement is not possible, the Mediator needs to submit a report to the Authority, with recorded reasons in writing, as per Form-5 in Schedule-I.

(2) The Authority/Mediator, shall not retain the hard/soft copies of documents exchanged between parties or submitted to Mediator or any notes prepared by the Mediator beyond 6 months other than application for mediation, notice issued, settlement agreement and failure report.

 

Parties to act in good faith — All the parties to a commercial dispute should participate in the mediation process in good faith with intention to settle the dispute.

 

Confidentiality of mediation — The Mediator, parties or their authorized representatives/Counsel shall maintain confidentiality about the mediation and, the Mediator shall not allow stenographic/audio/video recording of the mediation sittings.

 

Maintenance and publication of mediation data —

(1) The District Legal Services Authority (DLSA) shall forward the detailed data of the mediation dealt by it under the Act to the State Legal Services Authority (SLSA).

(2) The SLSA shall, maintain data of all mediations carried out by it/under its jurisdiction and publish the same, on quarterly basis, on its website as per Form-6 in Schedule-I.

 

Mediation Fee — Before commencement of the mediation, the parties to commercial dispute shall pay to the Authority a one-time mediation fee, to be shared equally, as per the quantum of claim as specified in Schedule-II.

 

Ethics to be followed by Mediator —

The Mediator shall-

(i) uphold the integrity and fairness of the mediation process;

(ii) ensure that parties in the mediation are fairly informed and have adequate understanding of procedural aspects of the mediation process;

(iii) disclose any financial interest/other interest in subject-matter of the commercial dispute;

(iv) avoid any impropriety, while communicating with the parties;

(v) be faithful to the relationship of trust and confidentiality reposed in him;

(vi) conduct mediation related to resolution of a commercial dispute, in accordance with applicable laws for time being in force;

(vii) recognise that mediation is based on principles of self-determination by parties and that the mediation process relies upon ability of parties to reach a voluntary agreement;

(viii) refrain from promises/guarantees of results;

(ix) not meet the parties, their representatives/counsels or communicate with them, privately except during mediation sittings in premises of the Authority;

(x) not interact with media or make public the details of the commercial dispute case, being mediated by him or any other allied activity carried out by him as a Mediator, which may prejudice interests of parties to the commercial dispute.

[No.A-60011(06)/20/2016-Admin-III(LA) — G.S.R. 606(E)]

Ministry of Law and Justice

Hot Off The PressNews

The Union Cabinet has has approved the strengthening of the mechanism for resolution of commercial disputes of Central Public Sector Enterprises (CPSEs) inter se and also between CPSEs and other Government Departments/Organizations. The Cabinet decision is based on recommendations of the Committee of Secretaries (CoS). The decision will put in place an institutionalized mechanism within the Government for speedy resolution of commercial disputes of CPSEs without the matter being referred to the Courts of law.

Details:

  1. A new two-tier mechanism will be put in place of the existing Permanent Machinery of Arbitration (PMA) mechanism to resolve commercial disputes (excluding disputes concerning the Railways, Income Tax, Custom & Excise Departments) between CPSEs inter se and CPSEs and Government Departments/Organizations, outside the Courts of law.
  2. At the First level (tier), such commercial disputes will be referred to a Committee comprising of Secretaries of the administrative Ministries/Departments to which the disputing CPSEs/Parties belong and Secretary-Deptt. of Legal Affairs. The Financial Advisors (FAs) of the two concerned administrative Ministries/Departments will represent the issues related to the dispute in question before the above Committee. In case the two disputing parties belong to the same Ministry/Department, the Committee will comprise Secretary of the administrative Ministry/Department concerned, Secretary-D/o Legal Affairs and Secretary-Department of Public Enterprises. In such a case, the matter may be represented before the Committee by the FA and one Joint Secretary of that Ministry/Department.

Further, in case of a dispute between CPSE and State Government’s Department/Organization, the Committee will be comprised the Secretary of the Ministry/Department of the Union to which the CPSE belongs and Secretary-D/o Legal Affairs and a senior officer nominated by the Chief Secretary of the State concerned. In such a case, the matter may be represented before the Committee by concerned Principal Secretary of the State Government’s Department/ Organization.

  1. At the Second level (tier), in case the dispute remains unresolved, even after consideration by the above Committee, the same will be referred to the Cabinet Secretary, whose decision will be final and binding on all concerned.
  2. For the prompt disposal of disputes, a time schedule of 3 months at the first level has been prescribed.

Department of Public Enterprises (DPE) will issue guidelines immediately to all CPSEs through their administrative Ministries/Departments and State Governments/UTs for compliance. The new mechanism will promote equity through mutual/collective efforts to resolve commercial disputes thereby reducing the number of litigations regarding commercial disputes in Court of Law and also avoid wastage of public money.

Cabinet