Analysing the Indian Mediation Bill 2021-An instrument for structuring a fragmented field of law

“An ounce of mediation is worth a pound of arbitration and a ton of litigation.[1]“

— Joseph Grynbaum

Alternative dispute resolution refers to resolving conflicts outside the regular court system. In India, alternative dispute resolution processes include arbitration, negotiation, mediation, and Lok Adalats. Mediation is a process in which disputing parties voluntarily attempt to resolve their differences with the assistance of a neutral third party known as the mediator.[2]

A mediator does not impose a solution on the parties but rather fosters an environment where they might reach a satisfactory solution. The advantages of mediation include its voluntary and non-adversarial nature, the process’s adaptability and confidentiality, its speed and cost-effectiveness, and the finality of agreements reached amicably. Mediation, as a form of ADR, further significantly helps to lower the caseload of the courts.

Mediation, unlike arbitration, has never been the subject of separate legislation in India. However, it is mentioned in Section 89 of the Civil Procedure Code[3], which states that whenever there is an element of settlement in a dispute, judges may give the parties the option of resolving the dispute through Arbitration, Mediation, Conciliation, Lok Adalat, or Judicial settlement.

The proposal to adopt separate legislation governing mediation in India has been raised on numerous occasions and is long overdue. Recently, a committee constituted by the Supreme Court in 2020 suggested and drafted an overarching bill to legitimise mediation-based conflict resolution, known as the Mediation bill of 2021.

Analysis of the Mediation Bill 2021vis-a-vis Singapore Mediation Convention

The Mediation Bill draft has 65 sections and 10 schedules. The purpose of the Bill is to legalise and institutionalise mediation to promote it as the initial step in resolving disputes. Even though procedural formality may initially result in rigidity, it is often seen as an essential instrument for structuring and integrating any previously fragmented field of law. In this sense, several of the Bill’s most significant provisions are outlined below.

Before filing any suit before any Court or Tribunal, Section 6 (1) [4]of the Bill makes it essential for the parties to attempt to resolve their disputes through pre-litigation mediation in line with the terms of the Bill. This section, therefore, makes pre-litigation mediation mandatory, which will save the parties a great deal of time and money and ensure the timely delivery of justice, as a period of 180 days starting from the commencement of mediation has been stipulated for the completion of the mediation process, with an additional 180-day extension possible with the consent of the parties[5].

The Supreme Court of India, in M/S. Afcons Infra. Ltd. & Anr v. M/S. Cherian Varkey Construction Ltd & Anr[6] broadened the scope of mandatory mediation by referring disputes to ADRs. It held that in the lack of agreement about Arbitration & Conciliation, the court might refer the case to other ADR techniques, including mediation, without the party’s consent.

In the case of Perry Kansagra v. Smriti Madan Kansagra[7], the Supreme Court listed several types of disputes where ADR may be a better option than going to court. These include cases involving trade, commerce, and contracts and money claims that come from contracts. ADR was also considered a better way to settle specific performance disagreements between insurers and insureds or bankers and customers than litigation.

Sections 28[8] and 50[9] of the Bill have been incorporated to establish that domestic and international mediation are legally binding on the parties to the mediation and any person claiming under them. Such settlement agreements shall be enforceable as the court decrees, and the parties may rely on them in other legal processes.

The domestic provisions of the Singapore convention for enforcing agreements reached through international mediation are included in the Bill. The fact that India is introducing a domestic law to implement the Singapore Convention demonstrates that it is transitioning from an observer in foreign policy to a leader and pioneer. The enforceability of mediated settlement agreements will minimise reliance on an already overburdened judicial system and steer parties toward a more cost-effective resolution.

Section 29(2)[10] of the Bill specifies four grounds for contesting a domestic Mediated Settlement Agreement, including a) Fraud, b) Corruption, c) Impersonation, and d) issues unsuitable for mediation.

The Bill proposes the creation of the Mediation Council of India in order to promote and strengthen domestic and international mediation in India. This is a positive step toward the establishment of a strong and effective institutional mediation framework. Continuous education and training will generate a community of competent and trained mediators. A digital database of mediated settlement agreements will aid legal research and development. Nonetheless, it is essential that confidentiality principles not be compromised in the process.

The bill contemplates parties entering into a written agreement to be competent to submit one or more disputes to mediation. Such an agreement can be in the form of a standalone agreement signed by the parties or a mediation clause incorporated into an existing contract, or contained in an electronic communication such as e-mails, letters, etc., recognised under the Information Technology Act, 2002, or stated in pleadings of a suit or other legal proceeding in which the existence of a mediation agreement is alleged by one party and also accepted by the other party.

The requirement for a documented mediation agreement can be easily met by creating clauses for multi-step dispute resolution in which mediation is the initial step. This simplicity of referring conflicts to mediation will encourage parties to participate in mediation. As a result, the legal system will profit greatly as parties will avoid court proceedings, at least in the near future.

Chapter VII of the Bill permits the use of online mediation via applications and computer networks, at any stage of the mediation, with the written approval of the parties. Although Section 89(1) of the Code of Criminal Procedure [11]permits us to resolve disputes outside of court, ODR is a newly developed and recently adopted technique in the Indian legal system that is receiving considerable interest. Following the Information Technology Act of 2000, e-commerce and e-governance in India have achieved formal and legal legitimacy. Due to e-commerce, online transaction-related issues have arisen; ODR can be considered the best option for their resolution.

The Mediation Bill, under Chapter X, specifies the kind of disputes that may be referred to as community mediation, namely, any dispute that threatens the peace, harmony, and serenity among the people or families of any area or neighbourhood. It also specifies the types of individuals that may be included in the mediation panel by the concerned authorities, i.e., respected members of the community with high standing and integrity, representatives of area/resident welfare associations, etc. Correspondingly, community mediation will be optimal for low-value civil matters, family disputes, and tortious claims.

Legislative gaps in the Mediation Bill and recommendations to solve them

While the Draft Bill is unquestionably a step in the right direction in recognising and promoting mediation as an effective and acceptable method for dispute resolution, there are certain legislative gaps and loopholes that are in need to be urgently addressed.

• We have already dealt with the ambiguity caused by the Arbitration and Conciliation Act 1996 regarding domestic vs foreign business arbitration and, consequently, the extent of judicial intervention permitted in arbitrations. Domestic mediation is defined vaguely under Clause 2[12] of the law and will undoubtedly give rise to numerous rounds of litigation to the Supreme Court of India before it is clarified. A person is regarded as domestic if they habitually dwell in India or if they operate a business there. The phrase “habitual resident” is not defined, nevertheless. The phrase “place of business” is already a contentious issue in international taxation. As stated under the Foreign Exchange Management Act, 1999, which clearly distinguishes between those residing in India and persons outside India, it is preferable that the mediation bill also identifies who is a domestic and foreign resident of India. This would also answer the new issue of businesses registered at International Finance Service Centres of India, which, despite being legally registered in India, enjoy the privilege of person a resident outside India under FEMA.
• Regarding the forms of disputes, international mediation may be both commercial and non-commercial, as the Preamble to the Bill mentions mediation that may be either commercial or otherwise. Even while the Singapore Convention exclusively refers to business mediation, this does not exclude us from incorporating additional forms into our laws.
• The Bill applies to India-based mediations of international commercial disputes. However, there can be cases in which an Indian party is involved and the mediation occurs outside of India. In such cases, India has difficulty carrying out settlement agreements. The Bill specifies that agreements established through mediation will carry the same weight as a court’s decision or judgement. Not included are settlement agreements obtained through international mediation outside of India. Here, the Bill is not in accordance with the Singapore Convention on Mediation as it allows international mediation agreements to be enforced in other nations. Therefore, this issue must be specifically addressed in the legislation.
• Section 6[13]is the operative provision that imposes the primary requirement to choose mediation as a first-resort conflict settlement process rather than court intervention. However, the clause is subjectively written, allowing for a variety of interpretations. The section requests that the parties “take steps to settle the issue through mediation,” but does not specify what “actions” constitute appropriate compliance with this provision. Like with the arbitration, it should be made clearer by the Bill that when parties legally agree to mediation, they are precluded from engaging in any other form of conflict resolution until they have exhausted the mediation process.

• Similar to Section 9 [14]of the Arbitration Act, Section 8[15]of the Bill should include a time limit for initiating the mediation procedure after interim relief is granted by the court or tribunal.

• As indicated in section 29,[16]the time limit is too short in cases of fraud, as fraud is frequently found much later. Even under Section 17 of the Limitation Act[17], the statute of limitations commences on the date of discovery of fraud or error, or the date on which the parties may have found it. Consequently, a similar sentence should also be put here.

• Lastly, When it comes to the registration of settlement agreements stated in section 22[18], Neither the Singapore Convention nor the Singapore Mediation Act 2017 states mandatory registration of settlement agreements. Thus, section 22 of the Bill is against the confidential nature of the mediation proceedings. Registration should depend upon the will of the parties whether they want to register the agreement or not.

Conclusion

In conclusion, the Bill is undoubtedly a step in the right direction for the acknowledgement and development of mediation and includes a fair share of beneficial aspects. In addition to fostering more confidence and trust in the mediation process, a stand-alone law on mediation will facilitate the resolution of conflicts between enterprises and commercial entities in India. At the same time, it is crucial that the drafters solve the shortcomings and issues mentioned above in order to guarantee that the Mediation Act, once it is passed, has detailed rules that, in actuality, make use of mediation as an ADR method more effective.

References

[1] CENTRE FOR MEDIATION AND CONCILIATION, http://centre4mediation.com/mediation-how-to-resolve-issues-without-wasting-time-and-money/ (last visited Oct.8, 2022).

[2] ASIAN INTERNATIONAL ARBITRATION CENTER, https://www.aiac.world/Mediation-Mediation (last visited Oct.10, 2022).

[3] The Civil Procedure Code, 1908, §89, No. 05, Act of  Imperial Legislative Council, 1908 (India).

[4] The Mediation Bill, 2021, § 6(1).

[5] The Mediation Bill, 2021, § 21.

[6] M/S. Afcons Infra. Ltd. & Anr v. M/S. Cherian Varkey Construction Ltd & Anr, 2010 (8)SCC 24.

[7] Perry Kansagra v. Smriti Madan Kansagra, 2020 SCC OnLine SC 887.

[8] The Mediation Bill, 2021, § 28.

[9] The Mediation Bill, 2021, § 50.

[10] The Mediation Bill, 2021, § 29(2).

[11] The Civil Procedure Code, 1908, §89(1), No. 05, Act of  Imperial Legislative Council, 1908 (India).

[12] The Mediation Bill, 2021, § 2.

[13] The Mediation Bill, 2021, § 6.

[14] The Arbitration and Concilliation (Amendment) Act, 2019, § 9, No.33, Acts of Parliament, 2019 (India).

[15] The Mediation Bill, 2021, § 8.

[16] The Mediation Bill, 2021, § 29.

[17] The Limitation Act, 1963, §17, No.36, Acts of parliament, 1963 (India).

[18] The Mediation Bill, 2021, § 22.

The article has been authored by Ms Yatika Chhabra, a student at Symbiosis Law School Pune.