Khushi Dua, a third-year law student at the National University of Advanced Legal Studies in Kochi, discusses the proposed Mediation Bill 2021 and its impact on the mediation process in India…
“Justice delayed is justice denied” is a popular adage that suggests the time taken to resolve issues is critical to the attainment of justice for a person seeking justice. However, justice is often delayed in the Indian justice system due to its inability to dispose of cases in a timely manner. According to a recent survey, over 4.5 crores (a crore is equal to 10 million rupees) cases are pending across all courts in the country. Such a judicial backlog is the premise used to advocate the need for Alternative Dispute Resolution (“ADR”) mechanisms, including mediation as a way of resolving disputes.
Mediation refers to resolving disputes with the help of a neutral third party who helps the parties reach a mutually agreeable solution. The essence of mediation lies in the fact that the mediator neither tries the facts nor arbitrate the disputes. He merely acts as a facilitator. Unlike arbitration, mediation is not formalized and institutionalized in India. The recently proposed Draft Mediation Bill (“draft bill”) is a step towards institutionalizing mediation as a method of resolving disputes. This article attempts to highlight the present framework governing mediation and its shortcomings therein. To overcome shortcomings, the government has proposed the draft bill. However, the draft bill has raised various concerns which need to be addressed urgently.
Existing Legal Framework
To create an ideal environment for the growth of mediation, it is necessary to standardize various aspects while preserving its innovative and flexible nature. India does not have dedicated legislation on mediation. At present, there are three ways to initiate mediation proceedings in India—first, by providing mediation as a method of resolving disputes within the dispute resolution clause in contracts. This method is known as “private mediation.” The second manner is by way of reference through courts under Section 89 of the Code of Civil Procedure 1908 (“CPC”). This method is known as “court-referred mediation.” In the third way, several statutes provide for mediation as a method of resolving disputes.
Though there are numerous ways to initiate mediation proceedings, there seems to be a major lacuna in the overall legal framework. Private mediation has failed to garner support due to the lack of a regulatory framework on the enforceability of the settlement reached through this process. Section 89 of the CPC reads with Order 10 Rule 1A provides that civil courts are to refer disputes to the ADR process. The insertion of Section 89 via the 2002 amendment to the CPC gave impetus to mediation in India. However, in Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd., the Supreme Court highlighted certain ambiguities or drafting errors under Section 89 of the CPC, such as lack of clarity on the use of phrases like ‘judicial settlement’ and ‘mediation.’ The provision does not provide for the appropriate stage for referring the matter to mediation. Further, there is a lack of uniform rules of procedure governing mediation; thus, proceedings take place as per the rules prescribed by each High Court. All these factors have caused impediments in reaping its full benefits.
Lastly, some statutes such as the Companies Act 2013, MSME Act 2006, Industrial Relations Code 2020 etc., provide for mediation as a means of dispute resolution mechanism. However, the post-litigation scenario in cases under these statutes is governed by the CPC, and pre-litigation mediation is unregulated even under these statutes. Special attention must be drawn towards Section 12A of the Commercial Courts Act that provides for mandatory pre-litigation mediation in all cases that come before commercial courts except when urgent relief is needed. However, parties have tried to misuse the exception to avoid mediation leading to the failure of the provision to achieve its objective.
After looking into the gaps within the existing legal framework, one can appreciate the need for the recently proposed draft bill to regulate various facets of mediation within the Indian legal system.
Decoding the Draft Bill
An effective attempt has been made in the said draft bill to overcome the shortcomings within the existing framework. Some of the appreciable provisions of the draft bill include the establishment of the Mediation Council of India, promotion of private, online and community mediation as an acceptable process, enforcement of the successful outcome of the mediation in the form of ‘mediation settlement agreements,’ among others. Further, the draft bill incorporates detailed provisions on the enforcement of international mediation settlement agreements owing to the fact that India ia a signatory to the Singapore Convention on Mediation.
However, certain provisions have been left open-ended and ambiguous by the drafters, which need to be addressed urgently. Section 2 of the draft lays down provisions on the territorial jurisdiction of the mediation centers. The explanation to Section 2(i)(iii) needs to be reexamined as the phrase “place of business having closest relationship to the mediation agreement” is not defined adequately. Such loose drafting can lead to several interpretations. Thus, the drafters should define the phrase to avoid any conflicts over the jurisdiction of courts in future.
As far as subject-matter jurisdiction is concerned, Section 7 states that mediation shall not be conducted in relation to matters listed under Schedule II of the draft. However, it is pertinent to note that Schedule II is titled “disputes which may not be fit for resolution through mediation.” The use of two different phrases (shall and may) leads to different interpretations. Thus, making the language consistent under the said provisions would streamline their interpretation.
Further, Schedule II of the draft bill laid down an extensive list of cases that cannot be subjected to mediation. Though the provision states that the list is indicative in nature, the drafters seem to ignore the recent Vidya Drolia II judgment wherein the Supreme Court laid down the four-fold test to determine the arbitrability of the disputes. The Court’s four-fold test on arbitrability would also help determine whether disputes can be referred to mediation or not without leaving any scope for interpretations and uncertainties. However, the list under the bill is primarily based on balancing the rights in rem v. rights in personam without looking into other facets of the judgement. It is therefore important that all aspects of the four-fold test be incorporated within the statute instead of leaving it to the courts.
Under Section 6 of the draft bill, the legislators included the process of mandatory pre-litigation mediation (“mandatory mediation”). It is clear that the legislative intention behind the provision is to give impetus to mediation culture in India. However, the legislators failed to notice that India does not have enough infrastructure, such as no. of mediators and mediation centers etc., for mandatory mediation. Further, forcing unwilling parties to go for mediation can be counterproductive. The unwilling parties can resort to Section 26(1) of the draft bill, wherein parties can withdraw from mediation proceedings after communicating with the mediator, provided they have attended one session, thereby reducing the mandatory mediation to a procedural formality.
Thus, caution has to be taken as India already witnessed the failed attempt of mandatory mediation under the Commercial Courts (Amendment) Act 2018. In this regard, inspiration can be drawn from other jurisdictions such as Italy, where mandatory mediation was introduced with a sunset clause of four years. In Mr Krishna Murthi v. The New India Insurance Co. Ltd. & Ors. , the Supreme Court suggested that mandatory mediation should be introduced in India in a phased manner, starting with a limited category of cases. A similar approach ought to be adopted in India wherein mandatory mediation would start with a small pilot program. Inserting such a blanket provision on mandatory mediation in all cases at an initial stage can cause more harm than good.
Lastly, attention has to be drawn towards Section 29 of the draft bill wherein parties can challenge the mediated settlement agreement on fraud, corruption etc., within three months from the date of receiving the settlement agreement. The provision runs contrary to the general principle wherein the limitation period begins from the date of the discovery of the fraud and not from the date of receiving the said agreement. Thus, there is need to address the concerns revolving around the limitation period under the said provision.
Until now, India does not have any concrete legislation governing mediation. For this reason, for the first time, a valiant attempt has been made to create a standalone law on mediation. However, the draft bill suffers from various drawbacks, as identified through this article. Thus, the drafters or concerned authorities ought to consider the above-mentioned suggestions as and when they enact the law.
Khushi Dua is a third-year law student at the National University of Advanced Legal Studies, Kochi.
Suggested citation: Khushi Dua, Decoding India’s Draft Mediation Bill 2021, JURIST – Student Commentary, November 25, 2021, https://www.jurist.org/commentary/2021/11/Khushi-Dua-decoding-mediation-bill-2021/.
This article was prepared for publication by Esther Chihaavi, a JURIST staff editor. Please direct any questions or comments to she/her at firstname.lastname@example.org
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