Those out-of-court-settlements, which are prone to rounds of litigations, are giving way to private mediation between litigant companies where resolutions are quicker and cost-effective.
One of the high profile cases involving the partnership dispute between the Amarchand Brothers, a leading law firm in the country, was settled through private mediation. Similarly, large family business disputes, contractual, property disputes have been settled through the same process.
Looking at the success rate of mediation and the fact that the courts are loaded with such cases, the Central Government last month issued an ordinance to amend the Commercial Courts’ Act, 2015, which makes pre-institution mediation mandatory prior to instituting a commercial suit for matters that do not require urgent interim relief. The settlement arrived at under this provision shall have the same status and effect as an arbitral award on agreed terms.
“Although there are issues that will need to be ironed out, this is a step in the right direction for quick, cost effective and business- friendly dispute resolution,” Tara Ollapally, co-founder and mediator for Centre for Advanced Mediation Practice told BusinessLine .
She pointed out with a staggering 30 million cases pending, the average life of a case in India is 13 years. Litigants in the country pay ₹ 30,000 crore per year only to attend the court hearing.
Ollapally said when negotiations between the parties fail, one way to settle the dispute is to appoint a private mediator who uses specialised communication skills and negotiation techniques to facilitate disputing parties bridge their differences and find their own mutually acceptable solution to the dispute. Mathew Chandy, MD of Duroflex who was one of the beneficiaries of this process, said the entire mediation exercise was carried out in three days. “All the unnecessary rules and bureaucratic judicial process made way for open discussion and pragmatic compromises. Although the mediator played an instrumental role in shepherding us towards a settlement, we ourselves proposed and accepted the settlement terms. The result was a settlement that we were all comfortable with and everyone walked away satisfied.”
He pointed out that this process helped the recovery of the business quickly and has the next generation of the previously- feuding families a chance to be a family once again.
Welcoming the Centre’s move, the family business expert, Naveen Khajanchi said members of a family need to realise that no settlement will be completely fair for with regard to business family disputes. “The life has to move on. Hence, private mediators help them come to an understanding which is agreeable to both the parties. The move is actually a good development,” he said.
Ollapally said the mediator and the parties involved agree to confidentiality prior to the mediation. No information/documentation that is produced, shared or discussed in mediation can be used in any existing or subsequent arbitral or judicial proceeding unless such information or documentation is otherwise admissible or discoverable. She said research and experience have shown that less than one per cent of the cases settled at mediation reopen for litigation or arbitration.
She also pointed out that 98 per cent of Fortune 1000 companies in the United States have engaged in mediation over the past three years. Giant companies such as Facebook, Apple, Yahoo, Google, Amazon, Oracle, IBM have taken the help of private mediation to settle corporate disputes.
At the Bangalore Mediation Centre, the court-annexed mediation programme at the High Court of Karnataka, the settlement rate, according to lawyers attached to the centre is as high as is 60 per cent while the time frame for mediation at the centre is 90 days. About 80 per cent of mediations are settled on the first day of the process itself.
They are also binding between the parties as the settlement terms are executed as a contract under Section 74 of the Arbitration and Conciliation Act, which has the same validity as an arbitral award.
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