Historically, mediation has been commonplace in the Indian context, with the Gram Panchayats (Village Council) serving as the mediator at the community level to help resolve disputes of all kinds. The concept of mediation is not new—it has always been available as an alternative dispute resolution (ADR) mechanism for parties in a dispute. Mediation also stands out as a mechanism that can be tailored to the needs of the disputants, offering a highly flexible and adaptable process for dispute resolution. Therefore, the recent Mediation Act, 2023, is seen as progressive by the industry and the legal fraternity.
However, mediation has always been an informal and ad hoc process. Lack of standardisation and varying approaches followed by different mediators tend to have a significant impact on the outcome of the mediation process. The institutionalisation of the mediation process and the enforcement of ensuing agreements make the Act a much-awaited development for a litigious country like ours.
The salient features of the Act include provisions for setting up a Mediation Council of India (MCI), ensuring the confidentiality of proceedings, recognition of mediation institutes, empanelment of mediators, timelines within which mediation should be conducted, along with the withdrawal option from proceedings, and circumstances under which mediated agreements can be challenged, among others.
The industry, however, was divided on a key aspect of the Bill, which prescribes that pre-litigation mediation should be voluntary. While the initial version of the Bill had proposed to make pre-litigation mediation mandatory, the Parliamentary Standing Committee’s recommendation to make it voluntary has been accepted.
Proponents in favour of voluntary mediation argued that making it mandatory would have defeated the very purpose of the proposed legislation.
Mandatory mediation may result in frivolous proceedings being initiated by parties under default, with no intent to resolve the dispute, only further derailing the process. Those in favour of mandatory mediation have questioned the utility of this provision, stating that mediation has always been available as a recourse to disputants—so why the provision?
The Act is certainly a step forward in facilitating the ease of doing business in India and easing the pressure on the judiciary. But its implementation depends a lot on the timely setting-up of the proposed MCI that is tasked with laying down standards and regulations to drive the process forward.
Certain gaps will need to be addressed—such as the qualification of exceptional circumstances under which interim relief can be sought, the qualification criteria for the appointment of MCI members, the inclusion of non-commercial disputes with government entities, and the enforcement of settlement agreements when mediation is conducted outside of India.
While we have seen tremendous progress during the last decade in terms of precedence being given to arbitration over litigation, the effectiveness of the arbitration regime remains under question. The ambiguities in the Arbitration and Conciliation Act, 1996 have resulted in long-drawn proceedings/disputes. It is in this context and for the willing disputants with the intent to resolve, that the institutionalisation of the mediation process makes it a real ADR.
The Act seeks to institutionalise and formalise the mediation process, which is likely to improve the efficiency and effectiveness of the process in the future. It is further likely to improve the credibility and acceptance of the process amongst the stakeholders. With commercial disputes and litigations on the rise, India must embrace this new legislation to strengthen its image as an investment destination.
The authors are Partner and Director, respectively, Financial Advisory, Deloitte India