Mediation Act, 2023

The Mediation Act, 2023 represents a paradigm shift in the manner in which disputes are resolved in India. Enacted following the passage of the Mediation Bill, 2023 in both Houses of Parliament and receiving presidential assent on 15th September 2023, this Act aims to promote mediation as a faster, cost-effective, and less adversarial alternative to traditional court litigation. 

With a comprehensive framework that includes provisions for pre‐litigation mediation, online mediation, community mediation, and the establishment of a Mediation Council of India, the Act not only facilitates easier resolution of disputes but also seeks to reduce the burden on the already over‐stretched Indian judiciary.

In this article, we examine the historical background, key features, procedural elements, and potential impact of the Mediation Act, 2023. The discussion is arranged under clear headings to make it accessible to legal professionals, scholars, and practitioners who wish to understand this landmark legislation in depth.

Historical Context and Need for Mediation Act, 2023

Traditional Roots and Modern Challenges

Mediation in India is not a new concept. Historically, dispute resolution through mediation was practised in village panchayats, where local elders and respected members of society would resolve conflicts amicably. This traditional method was in stark contrast to the adversarial litigation process that evolved under the British administration. However, as the judicial system modernised and became more formalised, the rich tradition of mediation gradually receded.

Over the years, an increasing number of cases began to burden the court system, leading to lengthy litigation, higher costs, and overall delays in resolving disputes. Indian courts, recognising this problem, introduced measures such as Section 89(1) of the Code of Civil Procedure, 1908 to suggest alternative dispute resolution (ADR) methods like arbitration and mediation. Despite these initiatives and the establishment of various mediation centres, private mediation continued to lack a robust legal framework, thereby hindering its widespread acceptance and effectiveness.

The Legislative Journey

The Mediation Act, 2023 is the culmination of several years of deliberation and reform. Initially, the Mediation Bill, 2021 was tabled in the Parliament as an endeavour to consolidate and enhance mediation practices. The Bill underwent thorough review by the Standing Committee on Personnel, Public Grievances, Law & Justice. 

Their recommendations, outlined in the Committee’s 117th Report on the Mediation Bill, paved the way for key amendments. Following further debates in both the Rajya Sabha and the Lok Sabha, the Mediation Bill was finally passed and subsequently given presidential assent, marking the birth of the Mediation Act, 2023.

This legislative journey highlights the commitment of the Indian legislature to prioritise dispute resolution outside of traditional courtrooms and promote alternative methods that are not only efficient but also economically beneficial.

Understanding Mediation and Its Importance

What is Mediation?

Mediation is a voluntary and confidential process wherein disputing parties engage a neutral third party, known as a mediator, to help facilitate communication, identify issues, and negotiate a mutually acceptable settlement. Unlike adjudication or arbitration, mediation does not result in a binding decision imposed by the mediator. Instead, the mediator’s role is to encourage open discussion and guide the parties towards their own resolution.

Key characteristics of mediation include:

• Voluntariness: Participation in the mediation process is completely voluntary. No party is forced to agree to a settlement.
• Flexibility: Mediation is governed by principles rather than rigid procedural rules, allowing for customised solutions tailored to the specific needs of the dispute.
• Confidentiality: All discussions and communications during mediation are confidential, ensuring that parties can speak openly without fear of the information being used as evidence in future proceedings.
• Neutrality: The mediator must remain impartial, ensuring that no party is favoured and that the process is conducted fairly.

Mediation as an Alternative Dispute Resolution (ADR) Method

Mediation forms an integral part of the broader spectrum of ADR methods. It has gained prominence as an alternative to the conventional, often cumbersome, court litigation system. In addition to easing the load on the judiciary, mediation helps preserve relationships between disputing parties, making it particularly attractive for commercial disputes, family matters, and community conflicts.

Scope and Application of the Mediation Act, 2023

The Mediation Act, 2023 lays down the parameters under which mediation is legally recognised and enforced in India. Its scope is intentionally broad to capture a wide array of disputes, while also delineating specific boundaries for its application.

Applicability

The Act applies to mediation proceedings conducted in India under the following circumstances:

• Domestic Disputes: When all or both parties habitually reside in India or are incorporated in India.
• Contractual Basis: When the mediation agreement expressly provides that disputes should be resolved under the Mediation Act.
• International Mediation: When at least one party is foreign (either an individual or a corporate entity) and the mediation is conducted in India, though mediated settlements from proceedings held outside India are not enforceable under this Act.
• Government Involvement: When one of the disputing parties is a central or state government entity, particularly in commercial matters.
• Notified Disputes: The Act may also extend to other types of disputes as specifically notified by the government from time to time.

Pre-litigation Mediation

One of the most pivotal aspects of the Act is its emphasis on pre-litigation mediation. Parties are encouraged to attempt mediation as a dispute resolution mechanism before initiating litigation in civil or commercial courts. Particularly for commercial disputes of specified value, pre-litigation mediation is mandated. This requirement seeks to reduce frivolous lawsuits and ensure that disputes are resolved amicably at an early stage.

The Act also provides for mediators in such processes to be registered with the Mediation Council of India or empaneled by recognised court-annexed mediation centres or legal service authorities. This not only standardises the process but also enhances the credibility of mediation.

Detailed Provisions of the Mediation Act, 2023

The Mediation Act, 2023 is divided into several sections and chapters, each dealing with various elements of the mediation process. Here we discuss the key provisions in detail.

Mediation Agreement

• Writing Requirement: A mediation agreement must be in writing. This can either be a clause within a larger contract or a standalone document. The Act clarifies that ‘in writing’ includes:
  • Any document signed by the parties.
  • An exchange of communications, including electronic forms as per the Information Technology Act, 2000.
  • Relevant pleadings or other judicial filings where the existence of a mediation agreement is not denied.

Establishing a mediation agreement is crucial because it sets the legal basis for initiating mediation proceedings. It binds the parties to attempt mediation before resorting to litigation, ensuring that the mediator’s role is backed by enforceable commitment.

Pre-litigation Mediation

Voluntary and Compulsory Aspects

• Voluntary Nature: The Act stipulates that mediation should be voluntary. In situations where parties have not explicitly agreed, they may still opt for mediation before filing a civil or commercial suit.
• Mandatory Element for Certain Disputes: For commercial disputes of a specified value, the Act mandates pre-litigation mediation. This requirement ensures that parties consider mediation as a primary method of dispute resolution.
• Empanelment of Mediators: The Act mandates that mediators for pre-litigation mediation should either be registered with the Mediation Council of India or selected from an empaneled panel maintained by recognised institutions such as court-annexed mediation centres or legal service authorities.

Mediation Process and Procedural Aspects

Commencement and Timeline

• Commencement: Mediation is deemed to commence either from the date a mediation notice is received by a party (in cases with a prior agreement) or from the date the mediator consents to his/her appointment.
• Time Limits:
  The entire mediation process is required to be completed within 120 days from the date fixed for the mediator’s first appearance. This period can be extended by up to 60 days if both parties consent. These strict timelines are intended to prevent the process from becoming drawn out and inefficient.

Role and Conduct of the Mediator

• Facilitative Role: The mediator’s function is to facilitate communication and assist the parties in identifying the issues, exploring settlement options, and negotiating towards a mutually acceptable resolution. Importantly, the mediator does not decide the outcome or impose any settlement on the parties.
• Impartiality and Neutrality: The mediator is required to act impartially and is not bound by the procedural rules that govern court litigation (such as the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872). This flexibility is designed to promote candid discussions without the constraints of formal judicial procedures.
• Confidentiality Provisions: A cornerstone of the mediation process is confidentiality. All statements, documents, and communications exchanged during mediation must remain confidential. Furthermore, the Act specifically prohibits audio or video recordings of the proceedings to protect the privacy of the discussions.

Settlement Agreements and Their Enforceability

Mediated Settlement Agreement

• Final and Binding: Once the mediation results in an agreement, it must be documented in a mediated settlement agreement, duly signed by all parties and authenticated by the mediator. Upon signature, the agreement is deemed final and binding.
• Enforceability: The Act provides that a mediated settlement agreement, once finalised, is enforceable in the same manner as a court decree under the Code of Civil Procedure, 1908. This lends significant legal weight to mediation settlements.
• Grounds for Challenge: The Act permits challenges to the mediated settlement agreement only on specific grounds:
  • Fraud
  • Corruption
  • Impersonation
  • Disputes that are not fit for mediation as outlined in the Act (for example, certain criminal cases or disputes involving minors)
• Any challenge must be initiated within 90 days from when the party receives the agreement, although this period may be extended in cases where a sufficient cause is shown.

Registration of Agreements

• Optional Registration: Parties have the option of registering the mediated settlement agreement with a recognised authority within 180 days of receiving an authenticated copy. Registration enhances enforceability and provides an additional layer of legal security, although non-registration does not automatically invalidate the agreement.

Institutional Mediation: Mediation Service Providers and the Mediation Council of India

Mediation Service Providers (MSPs)

• Definition and Role: The Act introduces the concept of ‘mediation service providers’ which include:
  • Independent bodies or organisations that facilitate mediation.
  • Court-annexed mediation centres.
  • Bodies or authorities constituted under the Legal Services Authorities Act, 1987.
• These MSPs are responsible for accrediting mediators, maintaining panels of qualified professionals, and providing infrastructural support including secretarial assistance and technological resources needed for efficient mediation proceedings.

Mediation Council of India (MCI)

• Establishment and Composition: The Act mandates the creation of the Mediation Council of India (MCI) as a body corporate. The MCI is tasked with regulating and promoting mediation in India. It is expected to develop guidelines for mediator certification, oversee the registration of mediators, and recognise mediation institutes.
• Functions: Some core functions of the MCI include:
  • Laying down rules for the conduct of mediation.
  • Maintaining an electronic repository for mediated settlement agreements.
  • Reviewing and updating the certification and ethical standards of mediators.
  • Submitting annual reports to the government on the implementation of the Act.
• The establishment of the MCI is a significant step toward standardising and professionalising mediation practices in India.

Online and Community Mediation

Online Mediation

Adoption of Technology: Reflecting the growing role of technology in dispute resolution, the Mediation Act explicitly provides for online mediation. With the written consent of parties, mediation sessions may be held through secure digital platforms. These provisions ensure that the confidentiality and integrity of mediation proceedings are maintained even in an online environment.

Community Mediation

Local Dispute Resolution: Community mediation is targeted at disputes that could affect peace and tranquillity in a locality. The Act envisions the appointment of a panel of three community mediators who are tasked with resolving local disputes. It is important to note that while settlement agreements reached under community mediation are recorded, they are not enforceable as decrees of the court.

Advantages and Strategic Impact of the Mediation Act, 2023

The Mediation Act, 2023 is designed not only as a legal framework to promote mediation but also as a strategic instrument to transform the dispute resolution landscape in India. Some of its key advantages include:

Reduction of the Burden on Courts

By mandating and encouraging pre-litigation mediation for a significant class of disputes, the Act aims to reduce the volume of cases that eventually reach the courts. This will not only expedite dispute resolution but also ease the pressure on the judiciary.

Strengthening Legal Certainty and Enforceability

With mediated settlement agreements being granted the status of a court decree, parties can be assured of enforceability through the legal system. This provides a strong incentive for parties to resolve disputes via mediation.

Promoting Professionalism in Mediation

The involvement of mediation service providers and the Mediation Council of India ensures a high standard of professionalism and ethical practice. Standards for training, certification, and conduct of mediators will be laid down, thereby raising the overall quality of mediation practice.

Flexibility and Confidentiality

The flexible and confidential nature of mediation helps preserve business and personal relationships. Parties are more inclined to engage in a process that is less confrontational and more oriented towards cooperative problem-solving.

Alignment with International Practices

Although the Act does not yet provide for the enforcement of mediated settlements from international mediation conducted outside India, it aligns closely with international norms. This alignment positions India favourably in the global landscape of commercial dispute resolution, potentially turning the country into a hub for international mediation.

Economic and Social Benefits

Mediation is generally less expensive and quicker compared to court litigation. By providing a statutory basis for mediation, the Act enables parties to save on both legal costs and time, which is of paramount importance in the current economic climate.

A robust mediation framework encourages a cultural shift away from litigation. The development of a dedicated dispute resolution mechanism through the Act can foster a more amicable environment for handling conflicts across different sectors.

Conclusion

The Mediation Act, 2023 is a landmark piece of legislation that has the potential to transform dispute resolution in India. By formalising mediation as a viable and effective alternative to traditional litigation, the Act addresses both the need for faster dispute resolution and the demand for a more cost-effective and less adversarial process. Its comprehensive provisions cover every facet of mediation—from the establishment of mediation agreements and pre‐litigation mediation to the enforcement of mediated settlements and the creation of institutional structures such as the Mediation Council of India.

While the Act is robust in many aspects, certain limitations—such as the non‐enforcement of mediated settlements arising from international mediation—highlight areas where further reforms may be necessary. The eventual adoption of international conventions and further detailed guidelines by the Mediation Council of India could serve to bridge these gaps.