The Mediation Bill of 2023, after being passed by the Rajya Sabha on August 1, 2023, and by the Lok Sabha on August 7, 2023, received the assent of the President on September 14, 2023, and has been enacted by the Central Government via Notification No. CG-DL-E-15092023-248775 as "The Mediation Act of 2023" ("Act"), extending to the whole of India. However, the Act will come into force on a date that the Central Government may notify.

The objective of the Act is to promote and facilitate mediation, especially institutional mediation. The Act also addresses dispute resolution through online and community mediation in a cost-effective and time-bound manner. Furthermore, the Act provides for the enforcement of mediated settlement agreements and the establishment of a Mediation Council of India.

Mediation, in basic terms, is the process of intervention by a third party between two contesting parties with the aim of reconciling them or persuading them to settle their dispute without going into litigation.

Mediation is not a new process and is even mentioned in Section 89(1) of the Code of Civil Procedure, 1908, which was introduced by the Civil Procedure Code (Amendment) Act of 1999 and provides for the courts to refer parties to arbitration, conciliation, judicial settlement, or mediation for dispute resolution.

Section 3(h) of the Act defines mediation as the process whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person referred to as a mediator, who does not have the authority to impose a settlement upon the parties to the dispute. The said section includes and refers to pre-litigation mediation, online mediation, community mediation, conciliation, or an expression of similar import while defining “mediation” .

It is important to note that the Act has included conciliation in the definition of mediation, and under Section 61, read with the Sixth Schedule, it has rendered Part III of the Arbitration and Conciliation Act of 1996, which dealt with conciliation, insignificant.

As per Section 2 of the Mediation Act 2023, the Act shall apply to mediations where:

i. All parties habitually reside or are incorporated in or have their place of business in India, or

ii. The mediation agreement provides for dispute resolution in accordance with the Act, or

iii. There is an international mediation, or

iv. 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. The dispute is 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, are a party.

It is important to note that the Mediation Bill does not contemplate the enforcement of mediated settlement agreements resulting from mediation conducted outside India.

Section 6 of the Act, read with the First Schedule, provides an indicative list of disputes or matters not fit for mediation, which includes:

a) Disputes against minors, deities, and persons with intellectual disabilities,

b) Prosecution of criminal offenses,

c) Any dispute relating to the levy, collection, penalties, direct or indirect tax refunds,

d) Complaints or proceedings initiated before any statutory authority or body in relation to the registration, discipline, misconduct of any practitioner, or other registered professionals,

e) Disputes which have an effect on the rights of a third party who is not a party to the mediation proceedings, except in matrimonial disputes where the interest of a child is involved.

f) Any investigation, inquiry, or proceeding before the Telecom Regulatory Authority of India, Telecom Disputes Settlement Commissions, Securities and Exchange Board of India, Securities Appellate Tribunal, Appellate Tribunal, and under the Competition Act of 2002, etc.

g) Land acquisition and determination of compensation under land acquisition laws or any provision of law providing for land acquisition.

Section 3(u) of the Act defines pre-litigation mediation as the process of undertaking mediation, as provided under Section 5, for the settlement of disputes prior to the filing of a suit or proceeding of a civil or commercial nature in respect thereof, before a court or a notified tribunal under sub-section (2) of Section 5.

Pre-litigation mediation is highly beneficial as it offers a proactive and cost-efficient means of settling conflicts before they evolve into formal, drawn-out legal battles. It promotes transparent communication, cooperation, and an adaptable approach to crafting solutions that align with the parties' requirements and concerns. This approach saves time, money, and resources while also preserving relationships and confidentiality. Overall, it enhances the efficiency and amicability of the legal process.

Sections 8 through 12 of the Act provide for the qualifications and oversight of mediators. The Act allows the appointment of foreign nationals as mediators under specific conditions considering their qualifications, experience, and accreditation. Additionally, it accommodates the parties' preferences regarding the mediator's identity and appointment procedure. Furthermore, the new legislation effectively addresses the potential occurrence of conflicts of interest during mediation proceedings and establishes a well-defined procedure for the disclosure of any circumstance that may constitute a conflict of interest to manage such situations.

Section 18 of the Act provides that mediation proceedings must be completed within 120 days from the date of the first appearance or for an extended time frame of 180 days if agreed upon by the parties.

The Mediation Act 2023, while a crucial advancement in integrating mediation into the legal system, is not without its criticisms.

Section 28 of the Act permits challenges to mediated agreements on specific grounds such as fraud, corruption, impersonation, or when mediation was conducted for disputes falling outside the scope of Section 6. These challenges must be initiated within 90 days of receiving the agreement, with a possible 90-day extension. However, these grounds for challenging the agreement are restricted and do not encompass issues like duress, coercion, or the discovery of fraud beyond the limitation period. Additionally, the Act does not allow non-signatories to challenge, which presents a limitation in the framework.

Furthermore, the added process of mediation preceding the suit will also add to the already time-consuming and exorbitant litigation and as experienced in pre-institution mediation in commercial disputes, under Section 12A of the Commercial Courts Act, 2015, the defendants choose not to participate in mediation rendering it nugatory.

While it represents a significant step in formalizing and advancing mediation practices, it falls short in addressing certain practical issues, and therefore broadening the application of the process will further streamline the process and will increase the chances of resolution of disputes by mediation without having the need to go to trial.

Nonetheless, the Mediation Act, 2023 is a game-changing development in the realm of dispute resolution. By establishing clear standards, enhancing confidentiality, offering incentives, and ensuring enforceability, this legislation has substantially reshaped the mediation landscape.

It promotes mediation as the primary avenue for resolving disputes, aiming to streamline legal procedures while fostering a culture of collaboration and cooperation among conflicting parties. The Act represents a significant stride toward a more efficient, effective, and harmonious approach to dispute resolution.

About the authors: Apoorva Misra is a Partner and Nishant Rewalia is an Associate at Ahlawat & Associates.