Mediation Bill and its impact on businesses

With the advent of Industry 4.0, companies have increasingly gone global in terms of their commercial operations. This globalisation of a company’s commercial operations gives rise to a host of legal issues, especially when dealing with complex commercial disputes.

To navigate the same, countries across the world have been adopting Alternate methods of Dispute Resolution (“ADR”) such as mediation, arbitration, and conciliation.

While India has made considerable progress in terms of implementing arbitration as an ADR method, mediation as a dispute resolution mechanism is still struggling to find its validation and enforcement in law.

The Hon’ble Supreme Court in MR Krishna Murthi v. The New India Assurance Co. Ltd., discussed at length, the benefits offered by mediation and requested the government to consider the feasibility of enacting an Indian Mediation Act to address the concern regarding the lack of legal infrastructure for mediation.

In light of the above judgement and numerous other comments/opinions by various other courts, the Mediation Bill, 2021 (“Bill”) was proposed and eventually passed by both Houses of Parliament in August 2023 to encourage mediation as an ADR method.

The Bill aims “to promote and facilitate mediation, especially institutional mediation, for resolution of disputes, commercial or otherwise, enforce mediated settlement agreements, provide for a body for registration of mediators, to encourage community mediation and to make online mediation as acceptable and cost-effective process..." [Objective, Mediation Bill 2021].

Further, the Bill seeks to amend the provisions governing mediation/conciliation in the Indian Contract Act, 1872; the Code of Civil Procedure, 1908; the Legal Service Authorities Act, 1987; the Arbitration and Conciliation Act, 1996; the Micro, Small and Medium Enterprise Development Act, 2006; the Companies Act, 2013; the Commercial Courts Act, 2015 and the Consumer Protection Act in the manner as specified in the Third to Tenth schedule of the Bill respectively [Sections 58 – 65, Mediation Bill 2021].

While businesses have now become vigilant with the arbitration regime and are careful while adding arbitration as a means of dispute resolution in their commercial contracts, it is equally critical and pertinent to note the relevant provisions of the Mediation Bill in order to secure the dispute resolution clause legally.

The present article thus discusses such relevant provisions and impactful stipulations to be borne in mind not only while drafting dispute resolution clauses but also during the invocation and pendency of dispute resolution processes.

Applicability

Despite the Standing Committee’s recommendation that the government may not be excluded from the purview of the Bill, as it is one of the biggest litigants in the country, the revised version of the Bill does not seem to have considered the suggestion [One Hundred Seventeenth Report on The Mediation Bill, 2021, Parliamentary Standing Committee, pp. 13-15 (July 2022)].

The Mediation Bill exempts mediation of disputes in which the Central government or a State government, or agencies, public bodies, corporations and local bodies, including entities controlled or owned by such government, are one of the parties to the dispute unless the concerned dispute is referred to mediation, if so decided and notified by the government [Section 2, Mediation Bill 2021].

The Bill seems to give questionable discretionary powers to the Government to notify disputes for mediation.

Inclusion of private mediators and Mediation Service Providers

The Bill distinguishes between two kinds of mediators:

(i) a person who is appointed as a mediator; and

(ii) a person registered as a mediator with the Mediation Council [Section 3 (h), Mediation Bill 2021].

While the effort to open statutory mediation to private mediators is appreciable, there exists no benchmarks or restrictions to ensure the impartiality of a mediator, like Schedules 5 and 7 of the Arbitration and Conciliation Act (ACA).

This could be a cause of concern since commercial disputes are complex and defining certain benchmarks would go a long way to ensure the competence and impartiality of the mediators.

Seeking urgent interim relief from the Court prior to or during mediation

The Bill allows parties engaged in mediation to seek urgent interim relief by a court or tribunal in exceptional circumstances, either before the commencement of or during the continuation of mediation proceedings under the Mediation Act [Section 8, Mediation Bill 2021].

Unfortunately, the Act does not define what circumstances may be considered as exceptional, thus, leaving broad scope for interpretation. Furthermore, unlike Section 9 (2) of the ACA, there exists no stipulated time period within which the mediation proceedings will have to begin after receiving an interim relief.

Expiry of mandate of a mediator

As per the Bill, once the mandate of a mediator expires due to the reasons given in Section 13 of the 2021 Bill, a new mediator may be appointed within 7 days. However, no provision mentions the possible course of action if no mediator is appointed within 7 days.

Delays in the resolution of disputes via mediation in the absence of appointment of mediators will cause an obstruction for parties trying to settle the dispute amicably. Mechanisms to address such delays will be required to be put in place to realise the objectives of the Mediation Act.

Mediation to be completed in 180 days

To ensure speedy resolution of dispute and prevent delays, the process of mediation has to be completed within a period of 180 days in total from the date fixed for the first appearance before the mediator.

The time for mediation has been reduced from 360 days in the draft Bill to 180 days in the revised version of the Bill, pursuant to the recommendation of the Parliamentary Standing Committee [One Hundred Seventeenth Report on The Mediation Bill, 2021, Parliamentary Standing Committee, pp. 42-45 (July 2022)].

Enforceability of a Mediated Settlement Agreement

A mediated settlement agreement will be binding on parties and will be enforced in accordance with the provisions of Civil Procedure Code, 1908 similar to a judgement or decree passed by a Court [Section 28, Mediation Bill 2021].

This is a welcome move and is in line with India’s commitment as a signatory to the United Nations Convention on International Settlement Agreements Resulting from Mediation (Singapore Convention).

However, what remains to be seen is how internationally mediated agreements will be enforced since there are no specific provisions governing the enforcement of same as there are in Part II of the ACA. 

Grounds of challenge

A mediated settlement agreement may be challenged on four grounds. These include: (i) fraud, (ii) corruption, (iii) impersonation and (iv) where the mediation was conducted in disputes or matters which are not fit for mediation [Section 29, Mediation Bill 2021].

Further, a mediated settlement agreement cannot be challenged after 90 days of receiving the copy of the same by the party seeking to challenge the agreement.

However, if the Court is of the opinion that the applicant challenging the settlement agreement was prevented from the doing the same within the specified time-limit by a sufficient cause, then it may entertain an application for challenge within a further period of 90 days.

Composition and establishment of Mediation Council

According to the Mediation Bill, a mediation council will be established in order to discharge duties under the Mediation Act [Section 33, Mediation Bill 2021].

The Council is entrusted with, inter alia, the promotion of domestic and international mediation; laying down guidelines for education, certification and assessment of mediators, holding training, workshops and courses in the field of mediation [Section 40, Mediation Bill 2021].

Several concerns exist regarding the efficiency and impartiality of the council.

Firstly, like Section 43C of ACA, all these members are appointed by the Central government. However, unlike Section 43C of ACA, no mention of any consultation with Chief Justice of India (CJI) has found its way in the Bill.

Secondly, the sole appointment of the council members by the Central government points towards the perceived impartiality of the council.

Thirdly, the government’s heavy involvement via the council in the process of assessment and accreditation of the mediators, could impede the independence and impartiality of the mediators.

Lastly, the composition of the council has no mention of appointment of a foreign legal expert. This is a cause of concern, as the appointment of a foreign legal expert would aid in the process of international mediation, which the Bill seeks to regulate.

One can reasonably conclude that the Mediation Bill is definitely a step in the right direction. However, its implementation will need to be closely observed, particularly whether this step will actually reduce the burden on the Courts.

About the authors: Samir Malik is a Partner, Mahip Singh Sikarwar is a Principal Associate, and Himani Yadav is an Associate at DSK Legal.