A SNEAK PEEK AT THE MEDIATION BILL 2021 IN INDIA

Introduction

This Article would be incomplete if we do not quote Mahatma Gandhi, An Autobiography: The Story of My Experiments with Truth[1] "…both were happy with the result and both rose in public estimation…I realised that the true function of a lawyer was to unite parties riven asunder. The lesson was so indelibly burnt into me that a large part of my time during the twenty years of my practice as a lawyer was occupied in bringing out private compromises of hundreds of cases. I lost nothing thereby-not even money; certainly not my soul.”

Mediation as one of the means of Alternate Dispute Resolution takes us back to the Civil Procedure Code (CPC) Amendment Act, 1999 which introduced Section 89 in its present form with effect from 1st July 2002. Section 89 was inserted in CPC to allow Court to refer certain disputes to means of Alternate Dispute Resolution if found better suited to it than litigation.

In the Judgment of the Supreme Court of India in Salem Bar Association vs Union of India[2], the Petitioners had challenged amendments to CPC including Section 89. The Hon’ble Supreme Court (Chief Justice Kirpal, Justice Y.K Sabharwhal and Justice Arigit Pasayat) upheld the constitutionality of the provisions in the amendment and expressed the need to frame rules that the parties shall follow with regard to mediation. The Apex Court constituted a five-member committee to prepare draft model rules for Alternate Disputes Resolution (ADR) and also draft Rules for mediation under Section 89 of the CPC. The Committee framed draft rules in 2003 in two parts- the first part consisting of the procedure to be followed by the parties and the Court in the matter of choosing the particular method of ADR. The 2nd part consisted of draft rules of mediation under Section 89 of the CPC. However, the approval of the Rules framed by the Committee remained inconclusive. From 2003 to the present, a law ruling the process of mediation in India was a distant reality. The Hon’ble Justice N.V Ramana, the Chief Justice of India has in his erudite speech at the India-Singapore Mediation Summit 2021, highlighted the role that mediation can play and the absence of a law on mediation. The recently proposed Mediation Bill is a step towards formalising mediation as a dispute resolution approach in India.

Objective

The Mediation Bill (Bill No. XLIII of 2021) was introduced in Rajya Sabha on December 20, 2021, with the objective of maximizing and facilitating mediation, particularly institutional mediation, for the resolution of commercial and other disputes, enforcing mediated settlement agreements, establishing a body for mediator registration, encouraging community mediation, and making online mediation an acceptable and cost-effective process.

What is Mediation?

Mediation is the process of resolving disputes with the assistance of a neutral third party who assists the parties in reaching an amicable agreement. The mediator does not try the facts or arbitrate the conflicts, which is the core of mediation. He only acts as a channel. Mediation, unlike arbitration, is not a formalised and institutionalised process in India.

Applicability

The Bill will apply to mediation proceedings conducted in India and international mediation. If the Central or State Government is a party, the Bill will only apply to commercial disputes and other disputes as notified by such Government.

Mediation Agreement

Mediation agreement shall be in writing, by or between parties and anyone claiming through them. It further specifies that a mediation agreement could take the form of a contract clause or a separate agreement.

Pre-litigation mediation

Whether or not a mediation agreement exists, the Bill provides that the parties must take steps to resolve issues through pre-litigation mediation in line with the new law before filing any suit or proceeding of a civil or commercial form in any Court. It further states that pre-litigation mediation in commercial disputes of a certain value must be conducted in accordance with section 12A of the Commercial Courts Act, 2015, and the rules promulgated thereunder. The Bill governs the procedure of pre-litigation mediation provision in many statutes such as Companies Act, 2013, MSME Act 2006, Industrial Relations Code 2020 which were unregulated until this Bill.

It is clear that the legislative intent is to promote mediation culture in India. However, the legislators have not taken into account that there is lack of sufficient infrastructure for mandatory mediation, such as sufficient number of mediators and mediation centres, among other things.

Disputes not fit for mediation

Learning from the challenges that emerged in determining the arbitrability of some types of conflicts, legislators have made an attempt to provide clarity on mediation by offering an indicative list of disputes that are not suitable for mediation. Some of the disputes mentioned under First Schedule are allegations involving fraud, forgery, coercion, matters prohibited being in conflict with public policy. The Bill unwittingly exempts matters offering an unwilling party a wide range of grounds to avoid mediation, defeating the very objective of encouraging mediation.

Interim relief by Court

The Bill provides that if ‘exceptional circumstances’ exist, a party may, before the commencement of, or during the continuation of, mediation proceedings under this Act, file suit or appropriate proceedings before a court or tribunal having competent jurisdiction for seeking urgent interim relief.

What would constitute ‘exceptional circumstances’ has not been defined. One suspects that this provision is likely to be used extensively by parties reluctant to go in for mediation.

Conflict of interest & disclosure by mediator

The Bill mandates the procedure to be neutral and free of bias, which is perhaps the most significant element that drives parties to choose and believe in ADR mechanisms. The Bill recognises and enforces this principle by placing an obligation on mediators under this Section.

Territorial jurisdiction to conduct mediation

The Bill stipulates that mediation under this Act must take place within the territorial jurisdiction of the Court or Tribunal of competent jurisdiction, unless the parties agree to undertake mediation outside of that jurisdiction or through online mediation.

It is also explained that where the parties agree to conduct the mediation outside of the territorial jurisdiction or online for the purposes of enforcing, challenging, or registering the mediated settlement agreement, the mediation will be deemed to have taken place within the territorial jurisdiction of the court or tribunal of competent jurisdiction.

Role of mediators in mediation proceedings

A mediator can only facilitate a voluntary resolution of the dispute between the parties, exploring areas of compromise and generating options in an attempt to resolve the dispute. A mediator ‘may not’ impose any settlement nor give any assurance that the mediation may result in a settlement.

The use of words ‘may’ is inappropriate as the most basic rule of mediation is that the mediator and the mediation service provider lack the authority to impose a settlement upon the parties.

Role of mediators in other proceedings

Unless otherwise agreed by the parties, the mediator is prohibited from acting as an arbitrator, a representative or counsel of a party in any arbitral or judicial proceeding in relation to a dispute that is the subject of the mediation proceedings, or from being called as a witness in any arbitral or judicial proceeding by the parties.

Withdrawal by parties from mediation

Parties may withdraw from mediation at any time after the first two sessions. If a party fails to attend the first two mediation sessions without justifiable cause, the Court or Tribunal in subsequent litigation on the same subject matter may take the said conduct of such party into consideration and impose costs.

Time limit for completion of mediation

The Bill stipulates that mediation under this Act must be completed within one hundred and eighty days from the date set for the first appearance before the mediator, and that the term might be extended by another one hundred and eighty days by mutual consent.

It is not clear in the Bill as to what parties should do if they wish to keep mediation pending for more than a year and the mediator is glad to do so.

Mediated Settlement Agreement and Failure report

Agreements reached through mediation must be in writing, signed by the parties, and authenticated by the mediator, including those reached through online mediation. Such agreements will be final, binding, and enforceable in the same way that judicial decisions are (except agreements arrived at after community mediation).

Where no agreement is arrived at between the parties, the mediator shall submit a failure report to the mediation service provider and/or the parties as the case may be. Such report shall not disclose the cause of failure of the parties to reach a settlement, or their conduct during mediation.

Registration of Mediated Settlement Agreement

The mediated Settlement Agreement is required to be registered with an Authority to be constituted under the Legal Services Authorities Act 1987 and the rules made thereunder. Until such Authority is established, registration is not mandatory. The responsibility is cast upon the parties, mediator and the mediation service provider to register within a period of 180 days from the date of receipt. It has also been clarified that nothing contained in this provision shall affect the right of a party to enforce or challenge the meditated settlement agreement.

The requirement of registration of settlement agreement and thereby putting its terms in the public domain even if it is for the purpose of record only, discourages a party to opt in for mediation.

Termination of mediation

Mediation proceedings shall be deemed to terminate (i) on the date of signing of mediated settlement agreement, (ii) date of declaration by mediator that mediation is no longer justified, (iii) expiry of 7 days from the date of second mediation session where a party fails to appear, (iv) where a party opts out of mediation, (v) on expiry of time limit.

Challenge procedure

Mediated settlement agreements (other than those reached in court-referred mediation or by Lok Adalat or Permanent Lok Adalat) may be challenged only for the following reasons: fraud, corruption, impersonation, or relating to disputes not fit for mediation. The parties have ninety days from the date they receive the settlement agreement to challenge it.

In short, if parties involved allege after the mediation process, that material information was suppressed or misrepresented by the other side, then the mediation would be reviewed by a court of law.

Confidentiality

The Bill provides that the mediator, mediation service provider, parties, and mediation participants must keep all important aspects of the mediation process confidential, with the exception of the mediated settlement agreement. The confidentiality of mediation communications and information is critical to the validity and effectiveness of the process.

Online mediation

Online mediation must be carried out in accordance with the provisions of the Information Technology Act. However, both the mediators and the parties are required to maintain their autonomy and confidentiality. The need for online mediation is pressed into service as a fall out of the pandemic. No audio or video recording of the mediation proceedings can be made or maintained to ensure confidentiality.

Mediation Council of India

The Council will be established by the Central government. A chairperson, two full-time members (with mediation or ADR expertise), three ex-officio members (including Secretaries of the Ministries of Law and Justice and Finance), and one part-time member (from an industry body) will make up the Council. The Council's responsibilities include mediator registration, recognition of mediation service providers and institutes (providing training, education and certification of mediators).

This is a drastic departure from the mediation Bill drafted by the Committee of mediators. The present composition does not suit a professional body and is more aligned to being a government regulator.

Community Mediation

Community mediation may be used to address disputes that threaten the peace and harmony of a community's residents. A team of three mediators will oversee the proceedings. This is much needed given the increasing deep divisions in society. However, it will be a huge burden and it would be interesting to see how this will pan out in reality.

Provisions of the Bill to have overriding effect on mediation and conciliation contained in other laws.

The Bill adopts the view of the Supreme Court in Afcons Infrastructure & Ors. Vs Cherian Verkay Constructions & Ors.[3] that “mediation” and “conciliation” are synonymous. Provisions of Section 61 to 81 in Part III of the Arbitration & Conciliation Act, 1996 shall stand subsumed.

Dichotomy in mediation processes

The Bill provides that the prevailing forms of mediation in India i.e private mediation, Court annexed mediation, proceedings of Lok Adalat and Permanent Lok Adalat under the Legal Services Authorities Act, 1987 will remain unaffected.

Concerns on the Bill before it becomes the law

• The Bill is silent regarding the provisions to govern international mediation relating to non-commercial disputes, since Section 3(f) confines “international mediation” to mediation relating to a commercial dispute only.

• The Bill does not address enforcement of international mediated settlement agreement that have arisen under a foreign law.

• The Bill does not provide any details pertaining to the qualifications of a trained mediator nor provides any reference of the 'capacity to mediate'.

• The Bill provides that a domestic mediated settlement may be challenged on the ground of 'gross impropriety', without making any endeavour to define the term or specify its contours.

• Inserting a blanket provision on mandatory pre-litigation mediation in all cases at an initial stage can cause more harm than good.

• The Government has decided to take centre stage in the Bill but exempted itself from participating in the mediation process in the rules so framed and the Council that is to be established, managed and controlled by them as can be seen from Section 2(2) and Section 50 of the Bill.

• Section 7 states that mediation ‘shall’ not be conducted in relation to matters listed under Schedule II of the draft. However, it is pertinent to note that Schedule II is titled “disputes which ‘may’ not be fit for resolution through mediation.” The use of two different phrases (shall and may) leads to different interpretations. Thus, making the language consistent under the said provisions would streamline their interpretation.

• The Bill makes no provision for any punishment, accountability, or penalties for anyone who wilfully violates confidentiality.

 

Conclusion

In addition to the reforms discussed above, a great deal of shift in mindset of stakeholders, awareness about the process, and redefining the approach to mediation is essential for growth and sustainability of the mediation practice in India.

 

Disclaimer

The information contained herein is in summary form and is therefore intended for general guidance only. This publication is not intended to address the circumstances of any particular individual or entity. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. This publication is not a substitute for detailed research and opinion. Before acting on any matters contained herein, reference should be made to subject matter experts and professional judgment needs to be exercised. MKA cannot accept any responsibility for loss occasioned to any person acting or refraining from action as a result of any material in this publication.

 

[1] 134 (6^th ed. 1965)

[2] 35 (2002) (8)

[3] 2010 (8)SCC 24