Court and Tribunal Referral to Mediation Under the Mediation Act, 2023

Court and tribunal referral to mediation allows pending disputes to be placed before a neutral mediator for an attempt at amicable settlement. Section 7 of the Mediation Act, 2023 gives courts and tribunals express authority to make such referrals at any stage of the proceedings. 

The process supports faster dispute resolution while preserving the voluntary nature of settlement and the parties’ right to return to adjudication.

Add LawBhoomi as your preferred source on Google.

Add Now →

Meaning of Court and Tribunal Referral to Mediation

Court or tribunal referral to mediation takes place when a judicial body directs the parties to participate in mediation while a dispute is pending before it. Instead of immediately continuing with a full adjudicatory process, the matter is placed before an independent mediator who assists the parties in exploring the possibility of settlement.

The mediator does not decide the dispute, impose a solution or determine which party is legally correct. The mediator facilitates communication, identifies the actual points of disagreement and assists the parties in considering mutually acceptable terms.

A referral to mediation does not transfer the judicial power of the court or tribunal to the mediator. The court or tribunal remains responsible for adjudicating the dispute if mediation does not result in settlement.

Court-referred mediation is therefore different from arbitration. An arbitrator delivers a binding decision after considering the claims and evidence of the parties. A mediator only facilitates negotiations, and the outcome depends on the voluntary agreement of the parties.

Legal Framework for Referral to Mediation in India

The legal framework governing court and tribunal referral to mediation is principally found in:

• Section 7 of the Mediation Act, 2023;
• Section 89 of the Code of Civil Procedure, 1908;
• Order X Rules 1A, 1B and 1C of the Code of Civil Procedure, 1908;
• Special laws providing for mediation or conciliation in particular categories of disputes; and
• Judicial decisions interpreting the power and responsibility of courts to encourage alternative dispute resolution.

Before the enactment of the Mediation Act, 2023, court-referred mediation was largely governed by Section 89 of the Code of Civil Procedure and rules framed by different High Courts. The Mediation Act has now created a more comprehensive statutory framework for mediation, including referral, appointment of mediators, confidentiality, settlement, enforcement and institutional mediation.

Section 7 of the Mediation Act, 2023

Section 7 of the Mediation Act, 2023 specifically deals with the power of a court or tribunal to refer parties to mediation. It recognises three important principles concerning judicial referral.

Referral May Be Made at Any Stage

Under Section 7(1), a court or tribunal may refer the parties to undertake mediation at any stage of the proceedings.

The expression “at any stage” gives wide discretion to the referring authority. A referral is not restricted to the beginning of a suit, appeal, petition or tribunal proceeding. It may be considered after pleadings have been completed, after issues have been framed, during evidence, at an appellate stage or at another suitable point before final determination.

However, an early referral is generally more effective because the parties may avoid substantial litigation costs and procedural delay. A later referral may still be appropriate where the dispute narrows during proceedings or where the parties become more willing to negotiate after understanding their legal and factual positions.

Failed Pre-Litigation Mediation Does Not Prevent Referral

Section 7 begins with a non-obstante expression relating to the non-settlement of a dispute under Section 5(1) of the Act. This means that a previous attempt at pre-litigation mediation which did not produce a settlement does not prevent a court or tribunal from referring the dispute to mediation again.

The circumstances of a dispute may change after proceedings begin. Pleadings may clarify the issues, documents may reveal the strengths and weaknesses of the respective cases, or interim orders may alter the parties’ assessment of risk. A second attempt at mediation may therefore succeed even where the earlier process failed.

A failed pre-litigation mediation should not automatically be treated as proof that all future settlement efforts would be useless. The court or tribunal must consider the present circumstances and the possibility of meaningful negotiations.

Referral Does Not Compel Settlement

Section 7(3) expressly states that the parties are not under an obligation to arrive at a settlement merely because the court or tribunal has referred them to mediation.

This provision preserves the voluntary character of mediation. Participation in a referred process and acceptance of settlement terms are separate matters. Even where the parties are required to attend mediation, no party can be forced to accept a proposal or surrender a legal claim.

A valid mediated settlement must be based on free and informed consent. Pressure from the mediator, the opposite party or any other participant cannot replace genuine agreement.

Power to Pass Interim Orders

Section 7(2) authorises the referring court or tribunal to pass a suitable interim order for protecting the interest of any party where such protection is considered appropriate.

This power is important because mediation may require time. During that period, there may be a danger that property will be transferred, assets will be dissipated, confidential information will be disclosed or the subject matter of the dispute will be altered.

Depending on the nature of the proceedings and the powers available under the applicable law, an interim order may relate to:

• Preservation of property forming the subject matter of the dispute;
• Maintenance of the existing position between the parties;
• Protection against disposal or transfer of assets;
• Temporary arrangements concerning possession, custody or management;
• Restraint against conduct capable of frustrating the proceedings; or
• Protection of another legitimate interest until mediation concludes.

The purpose of an interim order is protective rather than punitive. It ensures that mediation does not place a party at an unfair disadvantage or make the pending proceedings ineffective.

Referral Under Section 89 of the Code of Civil Procedure

Section 89 of the Code of Civil Procedure, 1908 provides for the settlement of disputes outside the court. It applies where the court finds that the dispute contains elements of a settlement that may be acceptable to the parties.

The provision identifies four broad methods of alternative dispute resolution:

1. Arbitration;
2. Conciliation;
3. Judicial settlement, including settlement through Lok Adalat; and
4. Mediation.

Section 89 must be read with Order X Rules 1A to 1C of the Code. These provisions require the court to consider an appropriate method of settlement outside the ordinary trial process and to take further procedural steps depending on whether the settlement effort succeeds.

The purpose of Section 89 is not merely to dispose of cases administratively. Its wider objective is to provide parties with a dispute resolution process suited to the nature of their conflict.

Role of the Court or Tribunal Before Making a Referral

A referral should be based on judicial consideration rather than made mechanically. The court or tribunal should examine whether the dispute is capable of negotiated resolution and whether mediation would serve a practical purpose.

Several factors may be considered before making a referral.

Nature of the Relationship

Mediation is particularly useful where the parties have an ongoing or personal relationship. Family members, business partners, employers and employees, landlords and tenants, neighbours and contracting parties may need a solution that preserves communication or allows future dealings to continue.

A judgment may determine legal rights, but it may not repair the underlying relationship. Mediation provides space for addressing legal issues as well as practical concerns.

Possibility of a Negotiated Settlement

The referring authority may consider whether the dispute contains issues on which compromise is legally and practically possible. The existence of multiple claims, cross-claims, continuing obligations or flexible remedies may indicate that mediation could be useful.

The court is not required to conclude that settlement will certainly occur. A reasonable possibility of productive negotiation may be sufficient.

Conduct and Willingness of the Parties

The attitude of the parties may help the court assess whether mediation is likely to be meaningful. However, an initial objection should not always be treated as conclusive. Parties may oppose mediation because of misunderstanding, mistrust or insufficient knowledge about the process.

The court may explain the nature of mediation and clarify that participation does not require acceptance of an unfavourable settlement.

Urgency and Need for Immediate Adjudication

Some disputes require an urgent judicial determination. A referral may be inappropriate where delay could cause serious prejudice, where immediate coercive relief is required or where a legal issue must be authoritatively decided.

Even in an urgent matter, mediation may sometimes proceed after necessary interim protection has been granted.

Disputes Commonly Suitable for Court-Referred Mediation

The suitability of mediation depends on the facts of each case. Certain categories of disputes are generally more capable of negotiated settlement.

Matrimonial and Family Disputes

Matrimonial disputes, maintenance claims, custody issues, family property disagreements and conflicts between relatives may benefit from mediation. Such matters often involve emotional concerns and continuing relationships that cannot be adequately addressed through a purely adversarial process.

However, the presence of violence, coercion or serious power imbalance requires careful assessment and appropriate safeguards.

Commercial and Contractual Disputes

Disputes concerning payment, performance, supply, partnership, construction, services, licensing or commercial relationships frequently involve issues that can be resolved through negotiated financial or operational arrangements.

Mediation may allow the parties to restructure obligations, revise timelines or preserve a valuable business relationship.

Property and Partition Disputes

Property disputes between co-owners, family members or neighbours may involve possession, access, division, valuation and use of common areas. Mediation can help develop practical arrangements that may not be available through a simple decree.

Employment and Workplace Disputes

Disputes involving employment terms, workplace relationships, payment, termination or service-related concerns may be suitable where settlement is legally permissible and the bargaining process remains fair.

Consumer and Compensation Claims

Many consumer disputes and claims for compensation involve disagreement over the amount, mode or timing of payment. Mediation may provide a quicker route to acceptable relief where liability and settlement terms can be negotiated.

Matters Not Fit for Mediation

Section 6 of the Mediation Act, 2023 provides that mediation under the Act shall not be conducted for disputes or matters included in the indicative list contained in the First Schedule.

The exclusions broadly cover matters where private settlement may conflict with public interest, affect third-party rights, involve serious allegations requiring formal determination or concern legal status that cannot be changed merely through agreement.

The court or tribunal must therefore examine whether the dispute falls within a prohibited category before making a referral.

The Act nevertheless permits a court, where appropriate, to refer disputes relating to compoundable offences, including compoundable matrimonial offences, to mediation. Any settlement in such a matter remains subject to consideration by the competent court in accordance with the applicable criminal law. The mediated outcome does not by itself operate as a decree or finally terminate the criminal proceeding.

Consent in Court-Referred Mediation

Consent occupies a special position in mediation. The Supreme Court has distinguished between consent to refer a dispute and consent to settle it.

Under the judicial interpretation of Section 89 CPC, arbitration and conciliation ordinarily require agreement of the parties before a reference can be made. Mediation, Lok Adalat and judicial settlement may be considered by the court even where every party has not initially consented to the reference.

However, no settlement can be imposed through mediation. The parties retain complete control over whether an agreement is reached and what terms it contains.

Therefore, the following principles must remain separate:

• A court may possess the power to refer parties to mediation;
• Parties may be expected to participate sincerely in the process;
• The mediator may facilitate proposals and negotiations; but
• The final decision to settle belongs entirely to the parties.

Appointment of a Mediator After Referral

Section 8 of the Mediation Act deals with the appointment of mediators. Parties are generally free to agree on the name of the mediator and the procedure for appointment.

Where the parties cannot agree, an application may be made to a mediation service provider. The service provider is required to appoint an agreed mediator or, where agreement is absent or the chosen mediator refuses to act, a mediator from its panel with the mediator’s consent.

While making an appointment, the service provider must consider the mediator’s suitability and the preferences of the parties. The mediator must also disclose any circumstance that may create a conflict of interest or raise reasonable doubts about independence or impartiality.

These safeguards are especially important in court-referred mediation because confidence in the neutrality of the mediator directly affects the quality of participation.

Procedure Following Successful Mediation

Where mediation results in settlement, the agreed terms are reduced to writing and authenticated in the manner required by the Mediation Act.

• A mediated settlement agreement ordinarily binds the parties and persons claiming through them. Under the Act, such an agreement may be enforced in accordance with the statutory framework applicable to mediated settlements.
• In a pending court or tribunal matter, the settlement is placed before the referring authority so that appropriate orders may be passed. The authority may examine whether the agreement is lawful, clear and capable of implementation.
• Where the settlement resolves only part of the dispute, the remaining issues may continue before the court or tribunal.

Procedure Following Unsuccessful Mediation

• If mediation does not produce a settlement, the mediator issues a non-settlement report in accordance with the applicable law and procedure. 
• The report should not disclose confidential communications, admissions, proposals or reasons for failure.
• The dispute then returns to the court or tribunal for adjudication. 
• The parties retain their original legal claims and defences, subject to any procedural developments that occurred independently of the confidential mediation process.

Failure of mediation does not amount to a finding against either party. It also does not prove that a claim or defence lacks merit.

Confidentiality in Referred Mediation

Confidentiality is essential to effective mediation. Parties must be able to discuss weaknesses, interests and possible concessions without fear that these statements will later be used against them.

Communications made during mediation, settlement proposals and admissions made solely for negotiation are generally protected under the statutory confidentiality framework.

The mediator should not be called upon to disclose what occurred during the sessions, except where the law expressly permits or requires disclosure. Similarly, the court or tribunal should not seek details about which party made a particular offer or caused the mediation to fail.

Only the fact of settlement or non-settlement ordinarily needs to be reported.

Judicial Principles Governing Referral to Mediation

The Supreme Court has repeatedly emphasised the importance of Section 89 CPC in reducing unnecessary trials and promoting amicable resolution.

In Salem Advocate Bar Association v. Union of India, the Supreme Court recognised that alternative dispute resolution mechanisms were introduced so that every case filed before a court would not necessarily require final adjudication through trial.

In Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., the Supreme Court examined the operation of Section 89 in detail. It explained that courts should consider the nature of the dispute, inform the parties about the available ADR processes and select the process suited to the case.

The Court also clarified that a pending case does not permanently leave the judicial system merely because it is sent to mediation. If mediation fails, the case returns for trial or further adjudication.

These principles continue to guide judicial referral, although the Mediation Act, 2023 now provides a dedicated statutory basis for the process.

Benefits of Court and Tribunal Referral to Mediation

A properly considered referral may offer several advantages:

• It may resolve disputes more quickly than a complete trial or appeal;
• It may reduce legal expenses and repeated appearances;
• It allows flexible remedies beyond the ordinary limits of a judgment;
• It can preserve personal, professional or commercial relationships;
• It gives parties greater control over the outcome;
• It keeps sensitive negotiations confidential; and
• It reduces the burden on courts and tribunals.

These benefits depend on competent mediators, informed participation and timely referral. Mediation should not be treated merely as a procedural formality for reducing case statistics.

Difference Between Referral and Adjudication

A court or tribunal decides disputes by applying law to established facts. Its order may be binding even when one party disagrees with the result.

Mediation functions differently. The mediator facilitates discussion but does not exercise judicial power. The outcome arises from the parties’ agreement rather than an imposed decision.

Court referral does not weaken the authority of the judicial process. It creates an additional opportunity for consensual resolution while keeping adjudication available if negotiations fail.

Conclusion

Court and tribunal referral to mediation is an important part of India’s dispute resolution framework. Section 7 of the Mediation Act, 2023 permits referral at any stage, allows protective interim orders and confirms that no party can be compelled to settle.

When read with Section 89 CPC and the principles laid down by the Supreme Court, the provision requires courts and tribunals to identify suitable disputes, make timely referrals and protect the fairness of the process. Effective referral can reduce delay, preserve relationships and provide practical settlements, while unsuccessful mediation leaves the right to adjudication unaffected.