The Mediation Act, 2023: An Overview and the Road Ahead

Introduction

Courts are the primary institutions to adjudicate disputes between the litigants and a quintessential part of the justice delivery mechanisms. However, litigation before the courts is often found to be time-consuming and costly. In contrast, certain disputes are better suited for resolution through alternative dispute resolution mechanisms than litigation. Mediation is one of the 'primary' alternative dispute resolution mechanisms where the parties intend to resolve their dispute by involving a neutral third party who provides assistance to the disputants consensually. Informal, cost-effective and party-centric approach of mediation leads to a win-win situation for both parties and helps in preserving the relationship.

Despite this, there was no specific law regulating mediation in India. Till the enactment of the Mediation Act, 2023², it was largely conducted under Section 89 of the Code of Civil Procedure, 1908, with several lacunae attached to it. The need was long felt for an inclusive statute providing for a comprehensive structure for mediation, which can help gain more acceptability and encourage parties to resort to mediation. The Mediation Act, 2023, seeks to fill this gap by providing a comprehensive legal framework for mediation across India.

Legislative Background and Rationale

To bring this Act into existence, firstly, the Mediation Bill, 2021, was brought in and presented in the Rajya Sabha on 20th December 2021 by the Government and was referred to the Parliamentary Standing Committee on Personnel, Public Grievances, Law and Justice for review. After a wide consultation and detailed review with various stakeholders, the Standing Committee submitted its report to the Rajya Sabha on 13th July 2022. Thereafter, the Union Cabinet approved some of the recommendations of the Standing Committee and re-introduced the Mediation Bill, 2023, in the Rajya Sabha, which was passed on 02nd August 2023 and by the Lok Sabha on 07th August 2023. It received the assent of the President of India on 14th September 2023 and became part of the statute. Through Gazette notification on 09th October 2023, the Central Government notified limited sections of the Mediation Act, 2023, to come into force. They are namely, 'Section 1, Section 3, Section 26, Section 31 to 38, Section 45 to 47, Section 50 to 54 and Section 56 to 57' of the Act.

The Mediation Act, 2023, is a defining moment in the sphere of ADR as it is the leading statute governing mediation in India. This Act formalizes mediation by providing for the enforceability of mediated settlement agreements, safeguards confidentiality, recognizes online mediation, community mediation and provides for mediation service providers. The statement of objects of the Act highlights mediation as a cost-effective, time-efficient, and maintaining relationship which is predominantly appropriate for disputes involving relationships, including business and commercial disputes.³

Scope and Applicability of the Act

The Mediation Act, 2023, applies to mediation between the domestic parties as well as to International commercial mediation in India, wherein at least one party is a foreign national or a body corporate or body of individuals whose place of business is outside India.⁴ This Act also applies to court-referred mediation, pre-litigation mediation and mediation conducted pursuant to a mediation agreement.⁵

Certain kinds of disputes are explicitly barred from the application of this Act such as disputes involving third-party rights, criminal offences and matters relating to sovereignty or public interest, which are provided in the First Schedule of the Act.⁶ However, the provisions of this Act shall not apply to the proceedings conducted by the Lok Adalat and Permanent Lok Adalat under the Legal Services Authorities Act, 1987.⁷

Salient Features of the Mediation Act, 2023

Definition of Mediation

The Mediation Act, 2023, expands the scope of mediation and provides for legal recognition to voluntary pre-litigation mediation, online mediation and community mediation.⁸ It also removes the provision of conciliation from Part III of the Arbitration & Conciliation Act, 1996 and replaces it with mediation.⁹ Through this Act, different types and modes of mediations are statutorily recognized, however, conciliation has been completely omitted from different statutes and is being replaced by mediation governed under this Act.

Voluntary Pre-litigation Mediation

The Mediation Act provides for voluntary pre-litigation mediation in all civil disputes, irrespective of the fact that there was any prior mediation agreement in existence or not.¹⁰ Though the Mediation Act excludes commercial disputes of specified value from its purview, which will be subjected to the provisions of the Commercial Court Act, 2015.

Listing out Disputes not fit for Mediation

In the Mediation Act, 2023, provisions have been made to list out the matters that are not suitable for mediation.¹¹ This will help filter out such disputes instantly that are unfit for resolution through mediation. It is in contrast to the provisions of the Arbitration & Conciliation Act, 1996, which has not provided any guidelines for the classification of disputes that are subject to arbitration.

Timeline for Completion of Mediation

The Mediation Act, 2023 has incorporated a provision whereby a timeline has been introduced for the completion of the mediation process within 180 days from the date of first appearance before the mediator.¹² This period may be extended for another 60 days if agreeable to the parties. This provision will keep a check on all the stakeholders, including the mediator as well as parties, to complete the whole process of mediation within the time limit.

Establishment of the Mediation Council of India

To supervise the process of mediation, the Mediation Act provides for the establishment of an all-encompassing body named as the Mediation Council of India to perform the functions necessary for the development and promotion of domestic as well as international mediation in India.¹³

Provision for Online Mediation

Keeping pace with technological advancement, the Mediation Act, 2023, recognises online mediation under this Act.¹⁴ However, while online mediation is allowed, maintaining the integrity of proceedings and confidentiality is required to be maintained under this section, for which the mediator is empowered to take necessary measures.¹⁵

Agreement for Conducting Mediation

The Mediation Act, 2023, recognises such written agreements for mediation whereby parties agree to submit their existing or future dispute to mediation. Such agreements can be separate or integrated into the main contracts.¹⁶ This provision augments contractual certainty and encourages mediation, enabling drafting of the contracts.

Appointment and Conduct of Mediators

The Act provides that the mediators must perform impartially and neutrally. Prior to the commencement of the mediation, including during the mediation process, mediators are required to disclose any circumstances which may likely to give rise to any conflict of interest.¹⁷ The Act underscores facilitation, which reinforces the amicable nature of mediation.

Maintaining Confidentiality

Under the Mediation Act, 2023, confidentiality is mandated as a foundational stone of mediation. All communications during the mediation process, including statements, documents and proposals, are made confidential and inadmissible in evidence in any other proceeding.¹⁸ Any kind of recording of the proceedings during mediation is explicitly barred.¹⁹ Having these provisions as a part of the Act will facilitate open discourse between the parties and the mediator and safeguard profound personal information.

Mediated Settlement Agreements

One of the most unique features of the Mediation Act, 2023, is the provision for mediated settlement agreements. Once this mediated settlement agreement is signed by the parties and duly authenticated by the mediator, it becomes final and binding and enforceable as a decree of a civil court under the provisions of the Code of Civil Procedure, 1908.²⁰ Such a mediated settlement agreement can be challenged before a court of law on very limited grounds, provided, viz:

'(i) fraud;
(ii) corruption;
(iii) impersonation;
(iv) where the mediation was conducted in disputes or matters not fit for mediation under section 6'²¹

Mediation Service Providers

The Mediation Act, 2023 provides for mediation service providers who will 'accredit mediators and maintain a panel of mediators to provide the services of mediators for the conduct of mediation. They will also provide all facilities, secretarial assistance and infrastructure for the efficient conduct of mediation.²² Such mediation service providers can include a body or an organisation that provides for the conduct of mediation under this Act and needs to be recognised by the Mediation Council.²³ Apart from this, 'an Authority constituted under the Legal Services Authorities Act, 1987 or a court-annexed mediation centre or any other body as may be notified by the Central Government will also come under the category of mediation service providers which shall be deemed to be recognised by the Mediation Council.'

Pending Tasks and Challenges Ahead

Despite the progressive framework formulated through the enactment of the Mediation Act, 2023, several tasks remain pending and yet to be implemented. Some of the major pending tasks related to this Act are discussed below:

Notification of Rules

The effectiveness of the Mediation Act, 2023, is yet to be tested as the majority of the rules relating to various aspects are yet to be notified. To name a few, rules regarding the qualifications and accreditation of the mediators, their fee structures, protocols for conducting online mediation and process and requirements for registration of mediation service providers are pending notification.

Non-operationalized Mediation Council of India

Since the Mediation Council of India has been entrusted with several important responsibilities under the Mediation Act, 2023. However, it is yet to be constituted and fully operationalized. Due to this one reason, the Mediation Act has yet to achieve its intended objective. Therefore, it is imperative that the Mediation Council of India must be immediately constituted and fully operationalized to let it accomplish its regulatory and other important functions efficiently.

Non-Applicability for the Enforcement of Foreign Mediated Settlement Agreement

As per the provisions of the Mediation Act, 2023, it applies only to those mediations that are conducted in India, whether it is a domestic mediation or an International Commercial Mediation.²⁴ However, the Act does not make any provision for the enforcement of mediation settlement agreements conducted outside India and brought into India for enforcement. In this context, the recently brought Singapore Convention on Mediation, of which India is a signatory, provides for cross-border enforcement of mediation agreements. Making provision for the enforcement of a mediated settlement agreement resulting from international mediation will be on the lines of the Singapore Convention on Mediation and will help promote international trade.

Appointment of Mediator

In the Mediation Act, 2023, a mediator of any nationality is appointed as per the process agreed by the parties.²⁵ However, there are certain anomalies in this regard. First, for a foreign mediator to be appointed, he/she shall possess such qualification, experience and accreditation "as may be specified" in this regard. Second, there are no guidelines (unlike Schedule V of the Arbitration & Conciliation Act, 1996) to determine the circumstances giving rise to justifiable doubts with regard to the independence and impartiality of the prospective mediator. Both these aspects are required to be duly taken care of in future amendments to the Act.

Interim Injunction

The Mediation Act, 2023, provides for an interim injunction order that can be passed by the Court/Tribunal while referring them to mediation for protecting the interests of any party.²⁶ However, unlike Section 9 of the Arbitration & Conciliation Act, 1996, it does not provide for the nature and extent of such interim injunction orders. It is also not clear that the conditions for the grant of an interim injunction will be similar to those for an interim injunction sought under Section 9 of the Arbitration and Conciliation Act 1996. A clarification in this regard will help the courts and the parties seeking interim injunctions under this Act.

Online Mediation

While the provision of online mediation is a laudable step, it will bridge the geographical gap and will be convenient to all the stakeholders. However, to ensure the process is safe and secure, detailed rules are required to be prescribed, which will govern the conduct of parties during such online mediation for maintaining confidentiality.

Community Mediation

In the Mediation Act, 2023, provision for community mediation is incorporated primarily to resolve disputes in any area or locality that is likely to affect the peace, harmony and tranquillity amongst the local residents.²⁷ For this purpose, the competent authority is required to maintain a permanent panel of community mediators, and any such community dispute will be referred to a panel of three such mediators. However, there is no provision for any training/capacity building with respect to the mediation process for such community mediators in the Act. In the absence of any training about mediation, the efficacy of such community meditation is doubtful.

Grounds of Challenge

In the Mediation Act, 2023, provision has been made to challenge the mediated settlement agreement arrived at between the parties.²⁸ However, there is no need for the provision of a challenge to a mediation settlement agreement arrived at by the mutual consent of the parties. Further, the Act does not provide for any automatic stay if the mediation settlement agreement is challenged, which can lead to unnecessary litigation. Therefore, it is suggested that suitable changes must be made by the legislature in these aspects of the Mediation Act.

Conclusion

Enactment of the Mediation Act, 2023, which is the first standalone law on mediation in India, is certainly a constructive step to increase the space of the ADR apparatus in India. This Act signifies a transformative stride in the direction of an effective dispute resolution mechanism. By making provisions for statutory recognition of mediation settlement agreements, their enforceability as a court decree, adequate measures for maintaining confidentiality and institutional support through the Mediation Council of India, the Act braces mediation as a dependable alternative to litigation. This will also reduce the burden on the existing judicial system, which is already overburdened with the backlog of cases in India.

However, certain lacunae, such as delay in the rule-making, non-operationalization of the Mediation Council of India and lack of emphasis on institutional capacity building, are essential to realise the full potential of this Act. Therefore, to make the Mediation Act a comprehensive legal framework for the resolution of civil and commercial disputes, it is imperative to remove the above-stated defects, which will further India's position as a pro-ADR jurisdiction in all spheres.