The Mediation Bill, 2021

July 31, 2023

Analysis of The Mediation Bill, 2021

Background

Mediation is a process whereby a third party facilitates the settlement of a dispute between two parties or groups and helps them come to an agreement. With reforms in the judicial system of India, mediation has come to play an active role in addressing the long delays in the resolution of disputes. It has long been seen as an effective alternative dispute resolution mechanism due to the consensual nature of the process. Subsequently, Mediation Centers were established in court complexes across India to provide an option to the parties to amicably settle their disputes, wherever possible.

More often than not there are many commercial and family disputes which have been seen to be a result of a breach of a contractual agreement, miscommunication or intention to harass the other. In all such cases, it has been felt that bringing together the parties to the table can be an effective way of resolving their disputes and differences to settle to solutions which can be followed. However, another question that arises is the maintainability and non-binding nature of mediation agreements. As the mediation process is a consensual way of resolving disputes, the mediation agreements so drawn are non-binding in nature and do not impose any liability on the parties. In all such cases, to bring enforceability to the mediation agreements, the case is referred back to the Courts which then codifies the agreement into a judicial order. Due to the lack of enforceability of such agreement, the parties are often not convinced to pursue mediation. This new Bill is being looked at to bring such enforceability to the process and establish a robust mechanism of alternative dispute resolution to unburden the courts and reduce the number of unnecessary litigations.

The Mediation Bill, 2021 was introduced in the Rajya Sabha on December 20, 2021 and was then referred to the Parliamentary Standing Committee. The Rajya Sabha received the committee report on July 13, 2022. Upon which, the committee recommended significant changes to the bill, with the objective of institutionalizing mediation and establishing a Mediation Council of India. Further, on July 19th 2023, the Union Cabinet cleared the bill which is scheduled to be introduced in the Monsoon session 2023 of the Parliament.

Why is this Bill Important?

  • The need for strengthening alternative measures for dispute resolution have long been felt. With the increase in the pendency of cases before the Courts over the years and the enormous burden laid on the judiciary to dispose of cases, it is time to identify the nature of cases where disputes can be resolved through interventions at the pre-litigation stage itself.
  • While there are several statutes provisioning for undertaking a mediation process to resolve disputes, such as Code of Civil Procedure 1908, the Companies Act 2013, the Arbitration and Conciliation Act 1996, the Consumer Protection Act 2019 and Commercial Courts 2015, yet, at present there is no dedicated or standalone legislation for mediation in India.
  • The Bill aims to institutionalize the process of mediation and promote, encourage, and facilitate it to resolve disputes, commercial and otherwise. It further introduces some key features regarding mandatory pre-litigation mediation, institutionalizing a mediation council, defining the role of mediators, providing for the manner in which mediation agreements need to be drafted and introduces mediation at the community level in codified and formal manner.

Overview of the Bill

  • The Bill defines Mediation as ‘a process by which a party/parties request a third person which can be a mediator or mediator service provider to support them in reaching mutually agreed settlement of a dispute’. Following are some provisions being introduced under the Bill:
    Mediator to be empaneled: Mediator needs to be registered with the Council or empaneled by a court annexed mediation centre or empaneled by an Authority constituted under the Legal Services Authorities Act, 1987 or empaneled by a mediation service provider. Such mediators can be engaged for conducting pre-litigation mediation as well as other mediation processes.

 

  • Pre-Litigation mediation: The Bill mandates parties to try and settle civil or commercial disputes through mediation before approaching courts or any tribunal. For conducting pre-litigation mediation, a party may request any person designated for this purpose by the
    High Courts, or an Authority constituted under the Legal Services Authorities Act, 1987. The prelitigation process can be invoked irrespective of whether a pre-existing mediation agreement exists or not. 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.

 

  • Disputes which do not fall under Mediation: The Bill also provides for a list of disputes which will not be under the purview of the Bill and no mediation can take place for it. For example, disputes involving allegations of serious and specific fraud, fabrication of documents, forgery, impersonation, coercion; relating to claims against minors, deities; persons with intellectual disabilities; involving prosecution for criminal offences; any subject-matter under the National Green Tribunals Act; Any investigation, inquiry or proceeding, under the Competition Act, 2002; proceedings before the Petroleum and Natural Gas Regulatory Board;Land acquisition etc. Despite the list, the Bill leaves at the discretion of the Courts to refer any matter for mediation, if they feel any dispute relating to compoundable offences or matrimonial offences connected with or arising out of civil proceedings between the parties can also be referred for mediation. However, mediation agreements drawn in any such cases referred by the Courts shall not be deemed to be judgment or decree.

 

  • Process: Mediation for matters can take place within the territorial jurisdiction of the court or tribunal of competent jurisdiction to decide the subject matter of dispute. However, on the mutual consent of the parties, mediation may be conducted at any place outside the territorial jurisdiction of the court or tribunal, or by way of online mediation. Mediation process would have been deemed to have commenced when either party issues notice to the other for the same or where parties apply for mediation to a mediation service provider or where the parties have agreed to appoint a mediator. Mediation proceedings will be confidential, and must be completed within 180 days (may be extended by 180 days by the parties). The mediation in the form of Mediation Settlement Agreement (MSA) will be legally enforceable and can be registered with State/districts/taluk legal authorities within 90 days to ensure authenticated records of the settlement. A party may withdraw from mediation at any time after the first two mediation sessions.

 

  • Role and appointment of 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. Mediator shall attempt to facilitate voluntary resolution of the dispute by the parties and communicate the view of each party to the other. Mediator’s crucial role is to assist them in identifying issues, reducing misunderstandings, clarifying priorities and exploring areas of compromise and generating options in an attempt to resolve the dispute expeditiously.
    Settlement Agreements: Settlement agreement means and includes an agreement in writing between some or all of the parties resulting from mediation, settling some or all of the disputes between such parties, and authenticated by the mediator. The terms under this agreement are not limited to the extent of the subject matter of the dispute. It will be in writing and signed by parties. In case of institutional mediation, the agreement shall be submitted to the mediator, who shall, after authenticating the same and forward it with a covering letter signed by him, to the mediation service provider and in all other cases, the agreement shall be submitted to the mediator who shall, after authenticating the settlement agreement, provide a copy to all the parties. Where the mediation has failed, the mediator shall provide a failure report.

 

  • Enforceability of such agreements- 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 judgment or decree passed by a court and shall be binding on the parties. The agreements verified by the mediator shall be registered with an Authority constituted under the Legal Services Authorities Act, 1987. The Authority shall issue a unique registration number to such settlements. The settlement agreement can be challenged on account of fraud, corruption, impersonation or where the dispute was not fit for mediation.

 

  • Community mediation: Community mediation may be attempted to resolve disputes likely to affect the peace, harmony and tranquility amongst the residents or families of any area or 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).

 

  • Mediation Council of India-The Bill envisions the establishment of the Mediation Council of India (MCI) by the Central Government to perform functions necessary for the promotion and development of domestic and international mediation in India. MCI will broadly (a) recognise mediation service providers and mediation institutes (b) specify the method of grading mediation service providers, (c) establish guidelines for continuous education, certification, and assessment of mediators, (d) provide for mediator registration, (f) establish standards for professional and ethical conduct of mediators, mediation service providers, and institutes, and (g) prescribe a framework for registration of mediated settlement agreements. (h) keep an electronic record of mediated settlement agreements signed in India.

 

  • Mediation Fund- “Mediation Fund” will be established for the purposes of promotion, facilitation and encouragement of mediation. Monies provided by the Central Government; fees and other charges received from mediation service provider, mediation institutes or bodies or persons; monies received by the Council in the form of donations, grants, contributions and income; grants made by the Central Government or the State Government for the purposes of the Fund and amounts received in the Fund from any other source shall be credited to the Fund.

Stakeholders

The bill is applicable to:

  1. Indian residents or entities incorporated or operating in India,
  2. Parties who have agreed to submit their disputes to the Bill’s provisions by executing a mediation agreement; and,
  3. International mediation- where at least one part is (i) a foreign national, or (ii) body corporate, limited liability partnership, or association of individuals having place of business outside India, or (iii) a foreign government. In essence, parties who wish to be governed by the Bill must choose Indian law as the substantive law of the contract,
  4. Commercial disputes where one of the parties is either state or central government, or its public bodies, agencies, local bodies, corporations and entities controlled or owned by the government.

Pros of the Bill

  • The Bill introduces a pre-litigation process which is supplemented by an opt-out mechanism. So, a party may choose to withdraw from the mediation at any time after initial two mediation sessions by notifying the mediator and the other party of its intention to do so. The proceedings would be terminated as on the date such communication was made. Therefore, while making provisions for enabling a procedure to eliminate minor disputes from reaching courts, the Bill also gives an opportunity to opt-out of the same.
  • The requirement for a written mediation agreement is easily met by drafting multi-tiered dispute resolution clauses in which mediation is the first step. The ease with which disputes can

be submitted to mediation will persuade parties to mediate. As a result, the judicial system will benefit significantly because parties will avoid court for the foreseeable future[1].

  • The bill recognises mediated settlement agreements under the Civil Procedure Code 1908 (“CPC”), right to seek urgent interim relief for parties before commencement and during the mediation proceedings and provisions ensuring timely completion of mediation proceedings.[2]This will help the parties gain confidence in the process and motivate them to pursue it.
  • Enforcing mandatory mediation prior to litigation, from a policy standpoint, can lead to expeditious resolution of disputes. It will reduce the costs that parties would otherwise incur in litigation, which is widely regarded as expensive in India. It will also help to reduce the judiciary’s growing backlog of cases. The question that must be addressed is whether mandatory mediation as a pre-litigation tool, in the form proposed in the Bill, can help achieve the Bill’s objective.

[1] Ibid

[2] The Hindu, October 2022,Bajpai, Karuna, ‘Explained | The Mediation Bill, 2021’, accessed at: https://www.thehindu.com/news/national/explained-the-mediation-bill-2021/article65967986.ece

Cons of the Bill

  • While mediation is voluntary by parties, the Bill strives to make pre-litigation mediation mandatory for both the parties whether or not there is a mediation agreement between them. Making pre-litigation mediation necessary may result in delays and provide another instrument in the hands of truant litigants to prolong case disposition.

 

  • Further the Bill is applicable only to commercial disputes including cases where one of the parties are central or state government, public bodies, local bodies, etc. Through this Bill, mediation can also be explored for non-commercial disputes involving the government as one of the parties.

 

  • There is certain ambiguity under the provision of pre-litigation. To begin with, the usage of the words “Subject to other provisions of this Act” is unclear and, to some extent, unnecessary. If the provision is meant to be mandatory, subjecting it to other sections of the Bill is contradictory.[1]

 

  • Moreover, the choice of opting out from the mediation process after attending through the initial two sessions can likely lead to exploiting these provisions to first opt for mediation and then eventually resorting to arbitration/courts, which can lead to void of procedural formality. Therefore, if the purpose of the bill is to ensure that disputes go through mediation before it reaches court, then there is no reason for the bill to provide an option to avoid the process.

[1] Ibid

Recommendations of Standing Committee on the Bill4

  1. The Standing Committee objected to clause 26 of the Bill which stated that court annexed mediation, including pre-litigation, will be conducted in accordance with the directions framed by Supreme Court or High Court. The Standing committee objected that it goes against the spirit of the Constitution.
  2. The Committee proposed to reduce the time period of mediation from 180 days to 90 days with extension of 60 days.
  3. The Committee recommended that each state should have their own mediation council which will be headed by the Mediation Council of India (MCI). It further proposes to make MCI the single authority to regulate all mediation service providers and institutes.
  4. In cases of breach in confidentiality of mediation proceedings, the Bill does not have any provision of penalty or punishment. Therefore the Committee recommended that the Bill should provide for a provision for penalty or punishment in cases of breach of confidentiality.
  5. The Bill does not apply to international meditation conducted outside India. Thus, the Committee recommended revisiting the definition of international mediation so that the Bill can be brought in line with the Singapore Convention in the future.

Conclusion

In order to accelerate the process of dispute resolution, the Bill is an appreciable step and should be implemented after due discussion with all the stakeholder. If enacted, India will join Singapore, Hong Kong, Brazil, and the United States as one of the few jurisdictions in the world with its own commercial mediation statute.

4 117th Report on the Mediation Bill, 2021 (Volume I – REPORT), July 2022, accessed at:

https://sansad.in/rs/committees/18?departmentally-related-standing-committees

It is also a significant step because, once enacted, the new law will provide a much-needed domestic legal framework for enforcing mediated settlement agreements. It will also help to increase the confidence of investors and businesses in India.

References

  1. The Mediation                   Bill,2021,                    Rajya         Sabha,      accessed at                : http://164.100.47.4/BillsTexts/RSBillTexts/asintroduced/Mediation-RS%20int-20%2012%2021-E.pdf
  2. Kluwer Mediation Blog, Chaudhary Rangoon, November 2022, ‘A Critical Analysis of the Indian Mediation Bill 2021’ http://mediationblog.kluwerarbitration.com/2022/11/28/a-critical-analysis-of-the-indian-mediation-bill-2021/
  3. Mondaq, Jain Reshma, October 2022, ‘India: Mediation Bill, 2021: Necessity Or Over-Complication?’ https://www.mondaq.com/india/arbitration-dispute-resolution/1234594/mediation-bill-2021-necessity-or-over-complication
  4. The Hindu, October 2022,Bajpai, Karuna, ‘Explained | The Mediation Bill, 2021’ https://www.thehindu.com/news/national/explained-the-mediation-bill-2021/article65967986.ece

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[NOTE: This Bill analysis is prepared on the basis of information and materials available in media sources or the public domain only. ]