In another attempt to reduce the pendency before courts, costs of traditional protracted litigation and boost alternative dispute resolution mechanism in India, Legislature has enacted the Mediation Act, 2023 (‘Act’). The Act specifically aims to provide a comprehensive policy framework to promote institutional mediation. However, in doing so it does not impinge upon the existing laws for conducting mediation and is not applicable to any pending mediation. It most significantly introduces online, institutional and pre-litigation mediation not only for commercial disputes but also for other civil disputes.

The ‘What’ of Mediation:

As per the Act, the term ‘Mediation’ includes all expressions whereby parties may attempt to reach an amicable settlement with the assistance of a third person. In other words, the mediator is merely a facilitator and cannot impose any settlement on the parties. Significantly, a settlement arising out of mediations will now be deemed to be a decree of the court and would be enforceable as such.

Any dispute can be referred to mediation except disputes relating to – criminal offences; proceedings before statutory authorities; cases affecting rights of third parties; claims against minors, deities, persons with intellectual disabilities; environmental matters; etc. Irrespective, the Courts may refer any pending dispute relating to a compoundable offence for mediation, with the caveat that the outcome must be considered by the Court and will not be deemed to be a decree of the court.

The Act is applicable to all the mediations conducted in India including those commercial disputes where the Government or its agencies are a party. It even includes international mediations for resolving commercial disputes wherein at least one of the parties is a foreign national or a body corporate or an association or body of individuals whose place of business is outside India. However, it does not provide for enforcement of settlement agreements arising from mediations conducted outside India.

Additionally, irrespective of any prior failed mediation, the courts may refer any pending dispute to mediation at any stage. While doing so, the court may also pass suitable interim orders to protect the interests of the parties.

The ‘How’ and ‘Where’ of Mediation:

In order to boost party autonomy, the Act permits the Parties to decide the procedure and to appoint any person (registered or unregistered) as a mediator. For this, parties may enter into a written agreement to mediate either before or after the dispute arises. However, in case of pre-litigation mediation, this discretion is limited to registered/ recognized / empaneled mediators. In case, the parties fail to appoint a mediator, they may apply to Mediation Service Provider for the same.

Confidentiality being the heart and soul of mediation, the Act categorically provides that the Mediator shall be duty bound to keep confidential all the events which transpired during the mediation including any correspondence or documents exchanged. In fact, the parties are also not permitted to use any such material as evidence in any subsequent proceedings before a court. Moreover, even courts cannot compel the mediator or any participant of mediation to disclose such information unless it pertains to a threat or plan to commit any offence, domestic violence, child abuse, imminent threat to public health or safety. However, the Act doesn’t provide consequences for breach of confidentiality.

Ideally, mediation must be conducted within the territorial jurisdiction of the court of competent jurisdiction, but parties are free to conduct it online or elsewhere for the sake of convenience. Nonetheless, it shall be deemed to be conducted within the territorial jurisdiction of a competent court for enforcement, challenge and registration purposes.

The ‘When’ of Mediation:

Mediation proceedings are deemed to commence on the date of receipt of notice initiating mediation; or when the mediator communicates his consent; or the date of appointment of the mediator by mediation service provider as the case may be. They are deemed to terminate when the settlement agreement is signed; or when the mediator signs non-settlement report; or on the date when parties opt out of mediation; or on the expiry of time limit prescribed herein.

The prescribed time limit for completion of mediation is 120 days from the date of first appearance before mediator. This period may be extended for another 60 days with the consent of the parties.

The ‘Why’ of Mediation:

If the mediation is unsuccessful, the mediator shall prepare a non-settlement report. In such cases, the time spent from commencement to termination of mediation shall be excluded while calculating limitation period for any subsequent proceedings.

Successful mediation results into a settlement agreement which must be in writing. It could be between all or some of the parties, settling all or some disputes between them. It must be signed by the parties and authenticated by the Mediator. Unlike arbitration, this settlement agreement may go beyond the issues which were referred to the mediator.

An aggrieved party may challenge this settlement agreement within 90 days (delay of further 90 days condonable) of its receipt, on the limited grounds of fraud; corruption; impersonation; or that the matter was not fit for mediation.

LKS Comments:

It is deeply concerning that the grounds for challenging the settlement agreement are very limited and do not include duress and coercion which could be rampant provided that both registered and unregistered mediators can be appointed. In fact, the Act does not even consider that fraud may be discovered only after the expiry of the limitation period. Moreover, a non-signatory cannot raise such challenge even if its rights are infringed.

With the ever-rising pendency of cases before the courts, speedier and cost-effective justice, is critical. The Mediation Act, 2023 is a significant step towards the same. It applies to a very broad spectrum of cases and is not limited to domestic disputes. It provides various avenues including online mediation, mediation institutes, community mediation, etc. for ease of access to mediation as a recourse to traditional litigation. The Mediation Act 2023 will thus significantly contribute to the formalization and advancement of mediation procedures within the country. However, as stated above, the Act does not deal with a few inevitable issues which in all practicalities will arise between the parties.