The Mediation Bill, 2021 was introduced in the Rajya Sabha in the year 2021 with the aim of encouraging and regulating the practice of mediation and to reduce the burden of courts. The Bill seeks to institutionalize mediation by establishing the Mediation Council of India, recognize mediation service providers and to regulate mediators.

Salient provisions of the Bill

Objective

[Section 6] - The Bill prescribes that any party, before filing any suit or proceedings of civil/commercial nature in any court, shall take steps to settle the disputes by pre-litigation mediation.

The initial draft of the Bill includes the term ‘shall’ under Section 6. However, the parliamentary standing committee has proposed to make pre-litigation mediation voluntary and not mandatory.

Application

[Section 2] - It applies only for mediation conducted in India involving:

(i) domestic parties;

(ii) at least one foreign party and relating to a commercial dispute;

(iii) if a mediation agreement contains a clause that reflects the application of the Bill.

Mediation Agreement

[Section 5] - A mediation agreement shall be in writing in the form of a separate clause in the contract or a separate agreement.

Mediators

[Section 10] - As per the Bill:

(i) A person of any nationality can be appointed as a mediator.

(ii) The parties are free to decide the mediator and the procedure for their appointment.

(iii) If the parties are unable to appoint a mediator, the mediation service provider shall do so within seven days after the receipt of an application by the parties.

(iv) The mediator shall disclose a conflict of interest, if any.

(v) The mediator shall not be bound by the Code of Civil Procedure, 1908, or the Indian Evidence Act, 1872 [Section 17(4) of the Mediation Bill, 2021].

Mediation proceedings

[Section 15] - Every mediation proceeding shall take place within the territorial jurisdiction of the court/tribunal of competent jurisdiction wherein the suit is sought to be instituted, except when there is a mutual consent by the parties stating otherwise.

Withdrawal from proceedings

[Section 20] - A party may withdraw from the proceedings at any time after the first two mediation sessions.

Excluded disputes

[Section 7 and Schedule 1] - Certain disputes, including those involving participation of minors, persons of unsound mind or involving prosecution for criminal offences and levy/collection/penalties or offences pertaining to direct/indirect taxes are excluded from the ambit of the Bill.

Time period

[Section 21of the Mediation Bill, 2021] – The bill stipulates that the mediation process must be completed within 180 days from the date fixed for first appearance before the mediator and can further be extended for another 180 days. 

The initial draft of the bill included the time limit of 180 days which can be extended to another 180 days. However, the standing parliamentary committee has proposed the time limit of 90 days which can be extended to another 60 days.

Binding nature

[Section 28(1)] - Agreements resulting from the mediation will be final, binding and enforceable in nature, which may be challenged on grounds of fraud, impersonation or if the dispute is not fit for mediation.

Establishment and role of the MCI

[Chapter VIII] - The Bill also lays down the establishment of a Mediation Council of India (MCI) whose functions would be to regulate mediators and recognize mediation service providers or institutes.

The role of the Council is to promote domestic and international mediation in India, lay down standards for professional conduct of mediators and recognize mediation institutions.

Community mediation

[Section 44] - The Bill also provides for community mediation that contemplates that any dispute affecting peace, tranquility and harmony amongst the residents/families of any area may be settled through community mediation with prior consent of the parties to the dispute.

Effect of the Bill on the Commercial Courts Act, 2015

As per Section 6 of the Mediation Bill, pre-litigation mediation in matters of commercial disputes will continue to be governed according to Section 12(A) of the Commercial Courts Act, 2015 (CCA). Therefore, the provisions of the Bill have no applicability to cases falling under the definition of commercial disputes within the meaning of CCA.

Amendments to various Acts

The Act further proposes to amend various acts such as The Indian Contract Act, 1872 [Section 58 of the Mediation Bill, 2021], The Consumer Protection Act, 2019 [Section 65 of the Mediation Bill, 2021] or The Code of Civil Procedure, 1908 [Section 59 of the Mediation Bill, 2021]. Further, it calls for additions of words such as “mediation” in exceptions to Section 28 of the Indian Contract Act, which pertains to restraint of legal proceedings. It also calls for substitution of clauses such as Section 18 of the Micro, Small and Medium Enterprises Development Act, 2006 prescribing resort to mediation (instead of conciliation) while making a reference to the Micro and Small Enterprises Facilitation Council.  

Concluding remarks

While there is no standalone legislation with respect to mediation in India, there are several statutes such as the CCA that contain clauses for mediation. The Mediation Bill, 2021 will indeed play a major role in institutionalizing and promoting mediation processes. In 2022, the Bill was referred to a parliamentary standing committee, which has proposed various amendments including reduction of timelines prescribed for completion of mediation proceedings and changing mandatory pre-litigation meditation to voluntary. The voluntary application of provisions of the Bill does not appear to serve the legislative intent of the Bill with which it was sought to be enacted.

Akshat Pande is the Corporate Practice Head & Partner and Chirag Gupta is a Senior Associate at Fox & Mandal.