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“For the purposes of pre institution mediation, the Authorities constituted under the Legal Services Authorities Act, 1987” may be authorized. Such Authorities are required to whole the manner of mediation inside a period of three months from the date of utility made via the plaintiff. The period of three months, however, may additionally be prolonged via a “further duration of two months with the consent of the parties. The period in the course of which the events remained occupied with the pre-institution mediation”, is now not to be “computed for the cause of obstacle below the Limitation Act, 1963. The Commercial Courts (Pre-Institution Mediation and Settlement) Rules,2018 have been adopted to supply impact to the provisions of the Commercial CourtsAct, 2015 as amended in 2018. “Mediation” is described beneath the Rules to imply“a system undertaken by using a Mediator to resolve, reconcile and settle a commercial dispute between the events thereto.” Mediator means a person empanelled by the Authority for conducting the mediation.

PIMS: ADVANTAGES AND DRAWBACKS

Advantages

Time and cost-effective.-Pre-institution mediation initiated under the Commercial Courts Act must be completed within a period of three months from the date of application made by the plaintiff, with a possible extension of two months with the consent of the parties. The time bound process saves time and costs incurred by the parties involved. Exploring the possibility of a settlement before filing a suit could avoid such lengthy litigation.

Confidentiality-This is mentioned under Rule 9 of the Act.Confidentiality of negotiations with a potential licensee is key to prevent disclosure of important business strategies to competitors. The Rules ensure confidentiality by providing that the mediator, the parties, and their counsels must maintain confidentiality about the mediation. Stenographic or audio or video recording of the mediation proceedings is prohibited under the Rules.

Assessing the strength of the opponent’s case-Through negotiations in a mediation proceeding, a party can get a sense of the opponent’s strengths and weaknesses and prepare for the possibility of contesting a suit.There is no bar on seeking interim relief if a suit is filed in the event of a failure of mediation proceedings. Depending on the party’s assessment of its case, the party may still seek an interim injunction even after trying mediation.

Negotiating in good faith- The Rules also provide that parties shall participate in the mediation process in good faith with an intention to settle the dispute.

Drawback

Section 12A imposes a mandatory obligation upon the plaintiff to initiate mediation. However, the Rules give the opposing party the right to refuse to participate in the mediation proceedings. If the opposing party does not appear, it will also result in the mediation proceedings being deemed a non-starter. This optional approach arguably results in the provision lacking teeth.

RELATIONSHIPS WITH VARIOUS LEGISLATIONS

MEDIATION UNDER THE CODE OF CIVIL PROCEDURE 1908 AND THE ARBITRATION AND CONCILIATION ACT 1996

The insertion of Section 89 in the CPC and enactment of the ACA marked the beginning of commercial mediation in India. The wording of Section 89 seemed to distinguish between mediation and conciliation as entirely separate mechanisms, until in the case of Afcons Infrastructure Ltd v. Cherian Varkey Construction Co Pvt Ltd,  the Supreme Court of India (SC) settled, inter alia, several procedural aspects of a reference under the aforesaid Section 89.

Section 89 read with Rule 1A of Order 10 of the CPC empowers a court to refer a dispute before it of suitable category to arbitration, conciliation, mediation, Lok Adalat settlement or judicial settlement. The SC clarified that of these five modes of alternate dispute resolution, arbitration and conciliation are to be governed by the ACA; mediation and Lok Adalat settlement are to be governed by the Legal Services Authority Act, 1987 and judicial settlement is governed by such procedure as may be prescribed in that regard.Reference to conciliation under Section 89 can be made by a court only if all parties to the dispute consent to it and agree to undergo assisted negotiation with the help of a neutral third party, either by an agreement or by the process of invitation. Acceptance has to be provided in accordance with Section 62 of the ACA, which is followed by the appointment of conciliator(s) under Section 64 of the ACA. If the parties reach a settlement, the concerned court, which made the reference, can scrutinizes such settlement and make a decree in terms of such settlement thereby making it enforceable

 While there is no direct legislation dealing specifically with mediation yet, private commercial mediation in India is usually considered as being governed by Part III of the ACA, which deals with conciliation of disputes arising out of a legal relationship, whether contractual or not, and to all proceedings relating thereto. To initiate mediation under the ACA, a party is required to send a written invitation to that effect to the other party and on acceptance by the other party, the mediation can begin. If the other party declines or does not respond, the mediation will be a non-starter.The parties can agree to appoint a maximum of three mediators to act jointly. Such an appointment can be mutual or through the assistance of a suitable institution.10 The mediator(s) will not be bound by the CPC or the Indian Evidence Act 1872.

The ACA provides the procedure to be followed for a settlement agreement when it appears to the conciliator that there exist elements of a settlement that may be acceptable to the parties. The first stage of the procedures entails formulation of the terms of a possible settlement by the conciliator. Then the conciliator is required to submit such terms to the parties for their observation, and further, the conciliator may reformulate the terms of a possible settlement in the light of such observations. Second, if the parties reach an agreement on a settlement of the dispute, they may draw up and sign a written settlement agreement. If requested by the parties, the conciliator may draw up, or assist the parties in drawing up the settlement agreement. Upon signing the settlement agreement, it shall be final and binding on the parties and persons claiming under them. Finally, the conciliator shall authenticate the settlement agreement and furnish a copy thereof to each of the parties.The ACA accords same status and effect to the settlement agreement as if it were an arbitral award on agreed terms on the substance of the dispute rendered by an arbitral tribunal under Section 30 of the ACA.The pre-condition is that all the essentials of the settlement agreement are met under Section 73.

Mediation Under MSME Development Act 2006

The MSMED Act was enacted with a view to facilitate the promotion, development, and competitiveness of enterprises classified as micro, small, and medium under the said Act.As part of the measures framed for recovery of delayed payments to micro and small enterprises, the provisions under Chapter V of the MSMED Act allows for a reference to be made by either party to the ‘Micro and Small Enterprises Facilitation Council’ (“MSEFC”) for resolution of a dispute between a buyer and a seller. On receipt of such a reference, the MSEFC either itself conducts conciliation or it can seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre for conducting conciliation.33 Sections 65 to 81 of the ACA apply to such a dispute as if the conciliation were initiated under Part III of that Act. This provision seems to open a window to access the benefits of settlement of disputes under Part III of the ACA. A potential drawback though is that in case settlement is not reached in a mediation conducted by the MSEFC, the MSEFC itself is empowered to adjudicate the same dispute by way of arbitration. This means that a ‘Med-Arb’ model is being followed by MSEFC which may be frowned upon by parties for reasons such as inability of the neutral to remain impartial as an arbitrator after having mediated the dispute.That said, the intent to provide Micro and Small Enterprises with a speedy and cost-effective mechanism is met in this instance. The online portal of ‘Delayed Payment Monitoring System’ called ‘MSME SAMADHAAN’ indicates that the MSEFC successfully conciliates and settles roughly 35% of the cases admitted before it.

COMPANIES ACT: MEDIATION AND CONCILIATION PANEL – A NON-STARTER

Companies Act, 2013 provided for maintenance of Mediation and Conciliation Panel as per Section 442 of the Act and Rules made thereunder. In fact, the Regional Directors (RDs) have been authorized to maintain the panel and they are doing so, however, the concept has not seen the light of the day in terms of actual commercial disputes being referred to by the National Company Law Tribunal (NCLT). Though legislated with a noble objective, the law leaves the discretion to the parties to move for settling the disputes through a mediation and conciliation panel maintained by the Central Government (Regional Director). The Regional Directors just puts up a list of name and addresses of empaneled mediators without any further efforts to sensitize the disputants to try the methods. It should have been maintained in an interactive website and there should be some compulsion as per law on the NCLT to at least allow the parties to explore the option before they fully litigate the matter. This would be in line with Section 89 CPC proceedings.

Ministry of Corporate Affairs (“MCA”) regulates the corporate affairs in India through various legislations. Majority of the commercial disputes involves companies (public and private), LLPs, partnership firms, societies, government companies and foreign companies. As a regulator, integrator, facilitator, and educator, MCA could be a natural partner in promoting ADR as a mechanism of dispute resolution, which would ultimately improve our ranking in EODB, which is presently being dealt with by Ministry of Law and Justice, as noted above.

IBC,2016 And Mediation

IBC does not formally recognize the concept of mediation, except under the Insolvency and Bankruptcy Board of India (Information Utilities) Regulations, 2017. Internationally, mediation is used during the restructuring and insolvency cases by the insolvency professionals. In USA and Europe, mediation is frequently used in insolvency proceedings  . However, a ray of hope is that the adjudicating authority under IBC i.e. NCLT may provide some direction to this in future.

Mediation Under Consumer Protection Bill 2018

It is proposed in the Consumer Protection Bill 2018 that the Central Government shall establish a Consumer Mediation Cells attached to the National Commission, State Commission and District Commissions. These mediation cells would empanel mediators. There would be a compulsory reference to mediation at the first hearing of the complaint after admission or at any later stage in the opinion of the District Commission . Department of Consumer Affairs has already established The Online Consumer Mediation Centre (OCMC) at NLSIU, Bengaluru . While mediation has been used successfully to resolve the consumer disputes by the mediation centers, this is another formal introduction of the concept of mediation in a commercial welfare legislation.

Mandatory mediation model of India

The Indian government should adopt a modified version of the Italian model of mandatory mediation. In order to introduce mandatory mediation, it is necessary to think this through well and not to rush into a decision which might result in unnecessary verification of the process. We should learn from the difficulties Italy encountered when it introduced mandatory mediation, so India will not have to deal with similar challenges. India should learn from the similar approach that is followed in Romania, which required parties who would be involved in certain kinds of civil cases to participate in a mediation information session before initiating civil proceedings . As part of the opt-in model, the parties interested in mediation must initiate their own mediation process after attending the mandatory information session. There was also a provision in Romanian law that provided for the dismissal of a case when the parties failed to attend an information meeting regarding mediation. According to the Romanian Constitutional Court, both provisions of these laws are unconstitutional, as they were crafted in a manner that burdens litigants unreasonably and violates the right of citizens to access justice. To prevent a law that makes mediation mandatory from hindering access to justice for the people, caution should be exercised while passing any law that makes mediation mandatory. Otherwise, the constitution could be violated.It is important to carry out a detailed study on how mandatory mediation has fared in India with the 2018 amendments to the Commercial Courts Act, 2015, so as to understand why it has not met its intended objectives. This information can be extremely useful when an attempt is made to institutionalize mandatory mediation in the country. 

Aishwarya Says:

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