The Mediation Act, 2023 was officially notified by the Ministry of Law and Justice on September 15th, 2023. Mediation has a long history in India, particularly through the use of Panchayats for resolving community conflicts. Despite its effectiveness, mediation lost popularity during British rule, leading to an increase in disputes and delays in the adversarial legal system.
The Code of Civil Procedure, 1908 under Section 89(1) allows courts to suggest various methods of dispute resolution, including mediation. This provision has been widely accepted and implemented by Indian courts, resulting in the establishment of mediation centers throughout the country. However, private mediation lacked structure and legal recognition, limiting its effectiveness and discouraging participation.
To address these issues, the Mediation Act 2023 has been brought to enhance the efficiency of mediation and establish a comprehensive legal framework for its practice in India.
Mediation offers several benefits, including its voluntary and non-adversarial nature, the flexibility and confidentiality of the process, its speed and cost effectiveness, and the finality of consensual settlements. Additionally, mediation can help alleviate the burden on courts by reducing the number of cases going to trial.
Currently, mediation in India can be court-referred, private (based on contractual agreements), or provided under specific statutes like the Commercial Courts Act, 2015, the Consumer Protection Act, 2019, or the Companies Act, 2013. Mediation services are offered by private ADR centers, mediation centers, as well as court or tribunal-established mediation centers known as court-annexed mediation centers.
Several countries, such as Australia, Singapore, and Italy, have separate laws on mediation. In India, there were multiple suggestions, including by the Supreme Court in 2019 and the High-Level Committee in 2017, to enact separate legislation for mediation. In 2020, a committee appointed by the Supreme Court recommended and drafted an umbrella legislation to give legitimacy to dispute settlement through mediation. The Mediation Act, 2023 aims to promote mediation, especially institutional mediation, and provide a mechanism for enforcing mediated settlement agreements.
“Mediation” as defined under the Mediation Act
“Mediation” 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;
The main goal of the Mediation Act 2023 is to broaden the range of mediation practices that can be legally recognized, such as pre-litigation mediation, online mediation, and community mediation. These practices will now be included under the definition of ‘mediation’. This change is in line with international standards, as the terms ‘mediation’ and ‘conciliation’ are commonly used interchangeably, as previously acknowledged by the Supreme Court of India and documented in the Singapore Convention.
As a result, Part III of the A&C Act becomes unnecessary and the Mediation Act seeks to remove the provisions on conciliation from the A&C Act.
Applicability of the Mediation Act
This Act shall apply where mediation is conducted in India, and—
(i) all or both parties habitually reside in or are incorporated in or have their place of business in India; or
(ii) the mediation agreement provides that any dispute shall be resolved in accordance with the provisions of this Act; or
(iii) there is an international mediation; or
(iv) wherein one of the parties to the dispute is the Central Government or a State Government or agencies, public bodies, corporations and local bodies, including entities controlled or owned by such Government and where the matter pertains to a commercial dispute; or
(v) to any other kind of dispute if deemed appropriate and notified by the Central Government or a State Government from time to time, for resolution through mediation under this Act, wherein such Governments, or agencies, public bodies, corporations and local bodies including entities controlled or owned by them, is a party.
Disputes Fit for Mediation (Section 6)
Section 6 of the Act provides that:
“A mediation under this Act shall not be conducted for resolution of any dispute or matter contained in the indicative list under the First Schedule: Provided that nothing contained herein shall prevent any court, if deemed appropriate, from referring any dispute relating to compoundable offences including the matrimonial offences which are compoundable and pending between the parties, to mediation”
The First Schedule of the Act provides a comprehensive list of disputes that are not suitable for mediation. These include disputes involving minors or people with intellectual disabilities, criminal prosecutions, tax-related issues, matters before regulatory bodies such as the Telecom Regulatory Authority of India and the Telecom Disputes Settlement and Appellate Tribunal, and cases under the Competition Act, 2002. The Act also extends its applicability to non-civil and non-commercial disputes, including compoundable offenses and matrimonial disputes. This provision offers clarity in identifying disputes that can be resolved through mediation. It surpasses the A&C Act, which relies on judicial precedents to determine the non-arbitrability of disputes.
Pre-Litigation Mediation (Section 5)
Section 5 of the Act mandates pre-litigation mediation, irrespective of the existence of a mediation agreement before filing any suit or proceeding of civil or commercial nature in any court. It provides that irrespective of any mediation agreement, the parties may voluntarily, and with mutual consent, refer the dispute for settlement by mediation before filing any case of civil or commercial nature in any court. This excludes commercial disputes of specified value that are subject to compulsory pre-litigation mediation under the Commercial Courts Act, 2015. Further, any court/tribunal may at any stage of a proceeding, refer the parties to undertake mediation, irrespective of whether there is a mediation agreement or not.
Meditation Agreement (Section 4)
A mediation agreement can be included as a clause in a written agreement or as a separate written agreement. According to the Mediation Act, a written agreement can be any document signed by the parties or an exchange of communications or letters, including electronic communication as permitted by the Information Technology Act, 2000. Additionally, if one party alleges the existence of a mediation agreement in any pleadings or other proceedings and the other party does not deny it, that would also be considered a valid written agreement. Furthermore, parties can choose to submit a dispute to mediation even after the dispute has already arisen between them.
Appointment of Mediators (Section 8):
The Act says unless otherwise agreed by the parties, a person of any nationality may be appointed as a mediator. However, the provision in Section 8(1) limits the freedom of choice by stating that a foreign mediator must possess the qualifications, experience, and accreditation as prescribed. In the absence of an agreement, the parties can request the Mediation Service Provider to appoint a mediator from their panel. The selection should consider the preferences of the parties (Section 9) and the mediator’s suitability in resolving the dispute.
Before being appointed, the proposed mediator must disclose any circumstances, whether personal, professional, financial or otherwise, that could create a conflict of interest (Section 10) or raise doubts about their independence or impartiality. This requirement aligns with the disclosure standards outlined in the UNCITRAL Model Laws and the International Bar Association (IBA) Guidelines on Conflict of Interest in International Arbitration. The obligation to disclose continues throughout the proceedings, and the mediator must promptly inform the parties if any such circumstances arise. The parties can choose to waive any conflicts through written agreement.
Furthermore, a mediator who has been appointed cannot act as an arbitrator or represent a party as counsel in any arbitral or judicial proceedings related to the mediation proceedings. They also cannot be presented as a witness in any proceeding.
Role of Mediator (Section 16)
Section 16 of the Act provides for Role of Mediator. The mediator’s responsibility is to help the parties involved in a dispute reach a voluntary resolution. This involves assisting them in identifying the problem, improving their understanding of the situation, clarifying what is most important, exploring potential agreements, and emphasizing that the ultimate decision regarding their claims is up to them. Importantly, the mediator must not force a resolution upon the parties or guarantee that mediation will lead to a settlement
Time-limit (Section 18)
According to the Act, the mediation proceeding must be completed within 120 days from the date of the mediator’s first appearance. This deadline can be extended by a maximum of 60 days if both parties agree. Additionally, the Commercial Courts Act 2015, which applies to pre-institution mediation, is also proposed to be amended. Currently, this Act requires the mediation process to be completed within three months from the date the plaintiff applies for it, with a possible extension of two months with the consent of the parties. Therefore, while party autonomy is respected, the Mediation Act aims to strike a balance by establishing clear timelines that prevent unnecessary delays and ensure that mediation remains a structured and productive process.
Registration and Enforcement of Mediation Agreement
Section 19 and 20 of the Act deals with registration of Agreement and Chapter VI deals with enforcement of Mediation Agreement. Mediated settlement agreement arrived at between the parties, other than those arrived in a court or tribunal referred mediation or award of Lok Adalat or final award of the Permanent Lok Adalat under section 21 or section 22E of the Legal Services Authorities Act, 1987, may, at the option of parties, be registered with an Authority constituted under the said Act, or any other body as may be notified by the Central Government, in such manner as may be specified and such Authority or body shall issue a unique registration number to such settlement agreements.
This can be done within 180 days (with a possible extension) of receiving the authenticated copy of the agreement. Registration is not mandatory, and the implications is provided under Explanation which says- For the removal of doubts, it is clarified that nothing contained in this sub-section shall affect the rights of parties to enforce the mediated settlement agreement under section 27 or challenge the same under section 28
A mediated settlement agreement resulting from a mediation signed by the parties and authenticated by the mediator shall be final and binding on the parties and persons claiming under them respectively and enforceable as per the provisions of sub-section (2).
The mediated settlement agreement shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a judgement or decree passed by a court, and may, accordingly, be relied on by any of the parties or persons claiming through them, by way of defence, set off or otherwise in any legal proceeding.
Grounds of Challenging Mediation Agreement (Section 28)
A mediated settlement agreement may be challenged only on all or any of the following grounds, namely:—
(iv) where the mediation was conducted in disputes or matters not fit for mediation under section 6.
An application for challenging the mediated settlement agreement shall not be made after ninety days have elapsed from the date on which the party making that application has received the copy of mediated settlement agreement.
Provided that if the court or tribunal, as the case may be, is satisfied that the applicant was prevented by sufficient cause from making the application within the said period of ninety days, it may entertain the application within a further period of ninety days.
ONLINE MEDIATION (Section 30)
Online mediation including pre-litigation mediation may be conducted at any stage of mediation under this 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. The process of online mediation shall be in such manner as may be specified. The conduct of online mediation shall be in the circumstances, which ensure that the essential elements of integrity of proceedings and confidentiality are maintained at all times and the mediator may take such appropriate steps in this regard as he deems fit.
MEDIATION COUNCIL OF INDIA (Chapter VIII)
The Mediation Act establishes the Mediation Council of India (MCI) as a corporate body responsible for various duties, including the development of India as a strong center for domestic and international mediation. The head office of the Council shall be at Delhi. The MCI will also oversee the conduct of mediation proceedings, handle the recognition, renewal, cancellation, or suspension of Mediation Service Providers, maintain an electronic depository for mediated settlement agreements, and submit an annual report on the implementation of the Mediation Act’s provisions to the Central Government. Additionally, the MCI will have the authority to create rules and regulations in alignment with the Mediation Act.
The Council shall consist of the following members, namely:—
(a) a person of ability, integrity and standing having adequate knowledge and professional experience or shown capacity in dealing with problems relating to law, alternative dispute resolution preferably mediation, public affairs or administration to be appointed by the Central Government—Chairperson;
(b) a person having knowledge and experience in law related to mediation or alternative dispute resolution mechanisms, to be appointed by the Central Government—Member;
(c) an eminent person having experience in research or teaching in the field of mediation and alternative dispute resolution laws, to be appointed by the Central Government—Member;
(d) Secretary to the Government of India in the Department of Legal Affairs, Ministry of Law and Justice or his representative not below the rank of Joint Secretary— Member, ex officio;
(e) Secretary to the Government of India in the Department of Expenditure, Ministry of Finance or his representative not below the rank of Joint Secretary— Member, ex officio;
(f) Chief Executive Officer—Member-Secretary, ex officio; and
(g) one representative of a recognised body of commerce and industry, chosen by the Central Government—Part-Time Member.
Mediation Service Providers
Section 40 provides that mediation proceedings may be conducted by a Mediation Service Provider which includes a body or an organization, or b) an authority constituted under the Legal Services Act, 1987, c) a court annexed mediation center, or d) any other body as notified, provided any of these are recognized by the MCI (defined below) for conduct of mediation proceedings under the Mediation Act. The Mediation Service Providers are tasked with the duty to inter alia accredit mediators and maintain a panel of mediators, provide all facilities such as secretarial assistance and infrastructure for the conduct of mediation proceedings, facilitate registration of mediated settlement agreements.