Can a Partial Settlement Be Reached Through Mediation in India?

Key Takeaways

• A partial settlement can be reached through mediation in India because the Mediation Act, 2023 permits settlement of some or all of the disputes between the parties.
• A partial settlement resolves only the issues expressly covered by the agreement. Matters that are not settled may continue through further mediation, litigation, arbitration or another appropriate process.
• A mediated settlement agreement dealing with only part of a dispute can still be legally binding if it is reduced to writing, signed by the parties and authenticated by the mediator.
• A partial settlement does not mean that mediation has failed. It can significantly narrow the dispute, reduce costs and leave only genuinely contested issues for adjudication.
• Clear drafting is particularly important in a partial settlement so that there is no uncertainty about which claims have been settled and which claims remain open.
• Confidential mediation communications relating to unresolved disputes generally continue to receive protection under the Mediation Act, subject to statutory exceptions.
• Partial settlements are particularly useful in commercial, property, family, partnership and contractual disputes involving several independent claims or issues.

What Is a Partial Settlement in Mediation?

A partial settlement in mediation means that the parties successfully resolve only some of the issues forming part of a larger dispute.

Many disputes contain several separate claims, rights or disagreements. Although the parties may not be able to reach a common understanding on every issue, they may agree on certain matters. Instead of treating the entire mediation as unsuccessful, the agreed issues can be formally settled.

Add LawBhoomi as your preferred source on Google.

Add Now →

For example, suppose two companies are involved in a dispute concerning:

• payment of outstanding invoices;
• interest on delayed payments;
• damages for breach of contract;
• quality of goods supplied; and
• continuation of their business relationship.

During mediation, they may agree on the outstanding amount and interest but remain unable to agree on damages. The payment-related issues can be recorded as a partial settlement, while the damages claim remains open for further resolution.

The same principle may apply to family disputes, property disputes, partnership disagreements, employment matters and other disputes capable of mediation.

Does the Mediation Act, 2023 Allow Partial Settlement?

Yes. The legal basis for partial settlement is found directly in Section 19 of the Mediation Act, 2023.

Explore the latest legal opportunities for law students and lawyers.

Explore Opportunities →

The Mediation Act, 2023 gives legal recognition to mediated settlement agreements and provides a statutory framework governing mediation in India.

Section 19 defines a mediated settlement agreement broadly enough to include an agreement between some or all of the parties that settles some or all of their disputes. It further provides that where an agreement is reached regarding all or some of the disputes, it must be reduced to writing and signed by the parties.

This language is important because it makes clear that a successful mediation is not limited to situations where every dispute is resolved.

Settlement of Some Disputes Is Legally Recognised

Section 19 recognises a written agreement resulting from mediation that settles some or all disputes between the concerned parties.

Therefore, where five issues are being mediated and agreement is reached only on three, those three issues may still form a valid mediated settlement agreement.

This reflects the flexible nature of mediation. Unlike adjudication, mediation does not require every issue to be resolved through a single final determination.

Settlement Can Be Reached During the Mediation Process

Section 19 further permits the parties to enter into an agreement concerning any dispute forming part of the mediation at any time during the mediation process.

This permits mediation to progress in stages. Parties do not necessarily have to wait until negotiations on every issue are complete before recording areas of agreement.

Explore LawBhoomi's free law library for students and lawyers.

Visit Library →

How Does a Partial Settlement Work?

A partial settlement generally involves identifying matters on which consensus has been reached and separating them from matters that remain disputed.

The mediator may assist the parties in clarifying the issues, understanding proposals and identifying areas where agreement is possible. However, the mediator cannot impose a settlement.

This follows the basic principles of mediation, particularly party autonomy, voluntary participation and self-determination. Even where parties are referred to mediation by a court, the actual terms of settlement must arise from consent.

Once consensus is reached on particular issues, those terms can be reduced to writing as required under the Mediation Act.

A properly structured partial settlement should make clear:

• Which issues have been finally settled: The agreement should specifically describe every claim, payment, obligation or right that has been resolved.
• What obligations arise from the settlement: It should state what each party has agreed to do, such as making payment, transferring property, withdrawing a particular claim or complying with a specific obligation.
• Which issues remain unresolved: Matters outside the settlement should be clearly identified so that there is no confusion about whether they have been waived or finally resolved.
• Whether mediation will continue: The agreement may clarify whether negotiations will continue regarding the remaining disputes.
• How the unresolved disputes will be dealt with: Depending on the circumstances, the remaining matters may proceed before a court, tribunal or arbitral tribunal.

Clear drafting becomes particularly important in a partial settlement because ambiguity may later create disagreement over the scope of the compromise.

Does Partial Settlement End the Entire Dispute?

No. A partial settlement ordinarily ends only those parts of the dispute that have actually been settled.

The unresolved claims generally remain open.

For example, if a dispute involves ₹20 lakh in unpaid invoices and another ₹10 lakh claimed as damages, the parties may agree that ₹20 lakh is payable but fail to agree on damages.

Explore practical law courses to build career-ready legal skills.

Explore Courses →

In such a case, the agreement concerning unpaid invoices may become final, while the ₹10 lakh damages claim can remain for determination through the applicable dispute resolution process.

A partial settlement therefore reduces the scope of the dispute without necessarily bringing the entire dispute to an end.

Where a pending dispute has been referred by a court or tribunal, a court or tribunal referral to mediation can similarly result in settlement of only part of the case, with the remaining questions continuing before the referring authority.

What Happens to Issues That Remain Unresolved?

Unresolved issues can be dealt with separately depending on the nature of the dispute and the proceedings already underway.

Mediation May Continue

The parties may continue mediation in an attempt to resolve the remaining issues.

This is particularly useful where the first settlement has reduced hostility and created greater confidence between the parties.

The settlement of one issue may also clarify the factual or financial position relating to other issues, making further negotiations easier.

Litigation May Continue

Where a dispute is already pending before a court, the settled issues may be dealt with according to the applicable procedure, while the remaining issues may continue for adjudication.

The exact procedural consequence may depend on the nature of the case, the terms of the settlement and the court before which proceedings are pending.

A partial settlement can therefore narrow the issues that require judicial determination without necessarily terminating the entire proceeding.

Arbitration May Continue

Where the dispute is governed by an arbitration agreement, unresolved claims may continue before the arbitral tribunal, subject to the applicable law and procedural framework.

A partial settlement can considerably narrow the number of questions that the tribunal eventually has to decide.

This also reflects the broader distinction between mediation and adjudicatory ADR mechanisms. The difference between arbitration, conciliation and mediation lies mainly in the role of the neutral third party, the procedure followed and the manner in which the final outcome is reached.

The difference between mediation and arbitration is particularly important in this context. A mediator facilitates a negotiated agreement, while an arbitrator ordinarily decides the dispute and delivers an arbitral award.

Is a Partial Mediated Settlement Agreement Binding?

A mediated settlement agreement satisfying the requirements of the Mediation Act can be legally binding even where it resolves only part of the overall dispute.

Under Section 27 of the Mediation Act, 2023, a mediated settlement agreement resulting from mediation, signed by the parties and authenticated by the mediator, is final and binding upon the parties and persons claiming through them.

The law further provides that, subject to the provisions governing challenge, the agreement may be enforced under the Code of Civil Procedure, 1908 in the same manner as if it were a judgment or decree of a court.

Therefore, the existence of unresolved disputes does not by itself make the settled portion ineffective.

For instance, if parties finally settle a ₹5 lakh payment claim but continue contesting another claim, the settlement relating to ₹5 lakh can have binding legal consequences independently of the unresolved claim.

The enforceability of a partial settlement is therefore linked to compliance with the statutory requirements applicable to mediated settlement agreements rather than to whether every dispute between the parties has been resolved.

What Are the Requirements for a Valid Partial Settlement?

Section 19 contains important formal requirements for a mediated settlement agreement.

It Must Be in Writing

Where an agreement is reached regarding all or some disputes, it must be reduced to writing.

A mere oral understanding reached during mediation should not be treated as equivalent to a properly executed mediated settlement agreement under the statutory framework.

The requirement of writing also helps establish the precise boundaries of a partial settlement.

It Must Be Signed by the Parties

The parties agreeing to the settlement must sign the written agreement.

Signatures provide evidence that the settlement terms represent their consent.

Since mediation is fundamentally based on voluntary agreement, proper execution of the document assumes particular importance.

It Must Be Authenticated by the Mediator

The Act also requires authentication by the mediator.

In institutional mediation, the authenticated agreement is forwarded to the mediation service provider and copies are provided to the parties. In other forms of mediation covered by Section 19, the mediator authenticates the agreement and provides copies to the parties.

The mediator’s role remains facilitative rather than adjudicatory. This is consistent with the principles of mediation, which require neutrality, impartiality and respect for the parties’ control over the outcome.

The Agreement Must Be Lawful

Section 19 makes it clear that an agreement that is void under the Indian Contract Act, 1872 cannot qualify as a lawful mediated settlement agreement.

Therefore, mediation cannot convert an otherwise unlawful or void arrangement into a valid agreement merely because the parties have consented to it during mediation.

The settlement terms must comply with applicable law and cannot be used to achieve an illegal object, defeat mandatory statutory requirements or validate an arrangement that is legally void.

Can a Partial Settlement Cover Matters Beyond the Original Dispute?

Yes. The Mediation Act permits considerable flexibility in framing settlement terms.

The proviso to Section 19 states that the terms of a mediated settlement agreement may extend beyond the disputes originally referred to mediation.

This reflects an important feature of mediation as an Alternative Dispute Resolution mechanism. Unlike adjudication, which is generally focused on deciding particular legal claims, mediation may address the broader relationship between the parties.

For example, parties involved in a payment dispute may also agree on future supply terms, timelines for performance or continuation of their commercial relationship.

Similarly, parties to a family or partnership dispute may settle not only the immediate claim but also agree upon arrangements intended to prevent future conflict.

This flexibility can help resolve the underlying causes of conflict rather than merely determining one legal claim.

Can a Partial Settlement Be Challenged?

A mediated settlement agreement is not completely immune from challenge. However, the grounds for challenge under the Mediation Act are limited.

Under Section 28, a mediated settlement agreement may be challenged before a competent court or tribunal on grounds including:

• fraud;
• corruption;
• impersonation; or
• mediation being conducted in relation to disputes or matters that are not fit for mediation under Section 6.

The Act also prescribes a time limit for bringing such a challenge. Ordinarily, an application must be made within 90 days from receipt of the settlement agreement. The court or tribunal may permit a further period of up to 90 days where sufficient cause for delay is shown.

These rules apply to mediated settlement agreements generally and are therefore relevant where only part of the dispute has been settled.

The limited grounds of challenge support certainty in mediation while still preserving safeguards against serious illegality or misconduct.

What Happens to Confidential Mediation Discussions After Partial Settlement?

Reaching a partial settlement does not ordinarily make all mediation discussions available for use in later proceedings.

Confidentiality in mediation is one of the fundamental principles supporting frank and meaningful negotiations.

Section 22 of the Mediation Act protects mediation communications. This may include proposals, opinions, admissions, promises, apologies and indications of willingness to accept settlement proposals.

Parties ordinarily cannot introduce such communications as evidence before courts, tribunals or arbitral tribunals merely because negotiations on the entire dispute were unsuccessful.

This protection becomes particularly important after partial settlement.

Suppose parties settle one claim but continue litigation regarding another. Statements or offers made during mediation concerning the unresolved claim generally remain protected by the statutory confidentiality framework.

Confidentiality also helps prevent parties from treating mediation merely as a method of collecting admissions or evidence for later adversarial proceedings. This encourages genuine settlement discussions.

However, confidentiality is not absolute. Disclosure may be permissible where the Mediation Act or another applicable law allows or requires it. Disclosure of the mediated settlement agreement itself may also be necessary for purposes such as enforcement or challenge.

Is Registration Necessary for a Partial Settlement?

Section 20 of the Mediation Act provides for registration of certain mediated settlement agreements for record purposes.

For agreements covered by that provision, registration is optional and may be undertaken with the prescribed authority or notified body.

Registration is distinct from the validity of the settlement itself. Section 20 principally deals with registration for record purposes, while enforcement is governed separately under the Act.

Therefore, the legal effect of a mediated settlement agreement should not be confused with the separate mechanism for its registration.

Where a settlement affects rights for which another law independently requires registration or compliance with additional formalities, those requirements must also be examined separately.

What Is the Role of the Mediator in a Partial Settlement?

A mediator facilitates negotiations but does not decide which party is legally correct.

In a dispute involving several issues, the mediator may assist in identifying areas where agreement already exists. This may help parties isolate the genuinely contested matters.

For example, parties may agree that money is payable but disagree about the amount. They may agree on the existence of a contractual obligation but disagree about damages. They may also settle financial claims but continue disputing questions relating to property or performance.

The mediator can help organise these issues and facilitate proposals, but the ultimate settlement remains based on voluntary agreement between the parties.

This reflects one of the core principles of mediation: control over the outcome remains with the parties rather than the mediator.

A mediator may therefore assist in reaching a partial settlement but cannot compel either side to compromise a remaining claim merely to achieve complete resolution.

Can Online Mediation Result in a Partial Settlement?

Yes. Section 19 specifically recognises agreements resulting from online mediation.

Accordingly, the principle allowing settlement of some or all disputes is not restricted to physical mediation sessions.

Parties participating through online mediation can also resolve only particular issues and record the settlement in accordance with the statutory requirements.

The same principles relating to writing, signatures, authentication, consent and confidentiality continue to remain relevant.

Online mediation therefore does not change the basic nature of a partial settlement. It only changes the mode through which negotiations are conducted.

Why Is Partial Settlement Useful?

Partial settlement can be valuable even when complete resolution is impossible.

It Narrows the Dispute

Settling undisputed or less contentious matters leaves fewer issues requiring adjudication. This may make subsequent proceedings shorter and more focused.

For example, if liability is settled but only the amount of damages remains disputed, the later proceeding may be confined to determining compensation.

It Can Reduce Costs

Where fewer claims remain contested, the amount of evidence, arguments and hearings required may decrease.

This may reduce both financial cost and procedural complexity.

One of the broader advantages of mediation as an ADR mechanism is its ability to provide a less adversarial and comparatively flexible method of resolving disputes.

It Allows Immediate Performance

Parties do not necessarily have to wait until every disagreement is resolved before performing obligations on which agreement has already been reached.

For instance, an admitted payment may be released while another disputed claim continues.

It Can Preserve Relationships

Partial resolution can reduce hostility and demonstrate that cooperation remains possible.

This may be particularly valuable in commercial, family and partnership disputes where the parties may continue dealing with each other.

Mediation is often preferred precisely because it is less adversarial than conventional litigation and allows greater emphasis on practical solutions.

It Encourages Further Settlement

An agreement on one issue may create momentum towards settlement of other disputes.

Once parties see that some differences can be resolved, further negotiations may become easier.

A partial settlement can therefore operate as an intermediate step towards complete resolution rather than merely as an endpoint.

Example of Partial Settlement Through Mediation

Consider a dispute between two business partners involving four issues:

1. repayment of a loan advanced by one partner;
2. division of profits;
3. ownership of certain business assets; and
4. allegations relating to unauthorised withdrawals.

During mediation, both partners agree on repayment of the loan and division of profits. However, they remain unable to agree on ownership of assets and the allegations regarding withdrawals.

The parties can record the loan repayment and profit-sharing terms in a mediated settlement agreement. Those matters become settled according to the agreement.

The ownership and withdrawal disputes can remain open for further mediation or adjudication.

This example illustrates why partial settlement should not be viewed as a failed mediation. Resolving even two out of four issues may significantly reduce the scope, cost and complexity of the remaining dispute.

Difference Between Full and Partial Settlement in Mediation

A full settlement resolves all disputes between the parties that are intended to be settled through mediation. Once implemented, no relevant issue ordinarily remains for further adjudication.

A partial settlement, in contrast, resolves only identified issues. Other matters remain outstanding.

The legal significance lies in clearly identifying the boundary between the two.

A carefully drafted partial settlement should leave no uncertainty regarding which claims have been concluded and which claims remain alive.

For example, a settlement agreement may expressly state that claims relating to outstanding invoices and interest are fully and finally settled, while claims concerning damages and defective performance remain unresolved.

Such wording reduces the possibility of later disagreement about the scope of the settlement.

The distinction also reinforces an important feature of mediation when compared with other ADR processes. As explained in the difference between arbitration, conciliation and mediation, mediation leaves the outcome in the hands of the parties and permits flexible settlement arrangements instead of requiring an adjudicatory decision on every issue.

Conclusion

A partial settlement can legally and effectively be reached through mediation in India. The Mediation Act, 2023 expressly recognises agreements settling some rather than all disputes between the parties. This allows mediation to produce meaningful results even where complete consensus is not possible.

Once the agreed terms are properly recorded, signed and authenticated, they can have binding legal effect, while unresolved issues remain available for further mediation, arbitration or adjudication. Partial settlement therefore reflects one of the most practical features of mediation: parties can resolve areas of agreement without being forced to abandon or compromise issues on which genuine disagreement continues.