Overview On The Provisions & Applicability Of The Mediation Act, 2023.

Overview On The Provisions & Applicability Of The Mediation Act, 2023.

by Hemangi Abhyankar, Partner & Ruddhi Bhalekar, Associate.

The Mediation Act 2023 (“Act”) received the President’s assent on 14th September 2023 and came to be published and notified by the Ministry of Law and Justice in the Gazette of India on 15th September 2023.

The object of this Act is to “promote and facilitate mediation, especially institutional mediation, for resolution of disputes, commercial or otherwise, enforce mediated settlement agreements, provide for a body for registration of mediators, to encourage community mediation and to make online mediation as acceptable and cost-effective process and for matters connected therewith or incidental thereto.”

Post this Act, all the mediations (subject to exceptions specified therein) will be regulated as per the provisions laid down in the said Act which were unregulated until the Act came into effect. Asper section 3(h) of the Act, the definition of “Mediation” is inclusive in nature and includes a process, whether referred to by the expression mediation, pre-litigation mediation, online mediation, community mediation, conciliation or an expression of similar import, whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person referred to as mediator, who does not have the authority to impose a settlement upon the parties to the dispute. The mediator shall amongst other things be guided by the principles of objectivity and fairness and protect the voluntariness, confidentiality and self-determination of the parties, and the standards for professional and ethical conduct as may be specified. The mediator shall not be bound by the Code of Civil Procedure, 1908 or the Indian Evidence Act, 1872.

Core Difference between Arbitration and Mediation:

• In an arbitration, the arbitrator has the power to determine the rights and liabilities of the parties to the dispute whereas in a mediation the mediator acts neutral and facilitates a settlement between the parties.
• The termination of arbitral proceedings is only upon passing of the final award whereas in mediation proceedings the settlement is at the discretion of the parties.

KEY PROVISIONS OF THE ACT:

A. Mediation Agreement

• The ingredients for a valid Mediation Agreement have been stated in section 4 which are as follows:
  • Agreement has to be in writing
  • Agreement should contain a clause stating the disputes, all or certain, which have arisen or may arise to be submitted to mediation
  • maybe in the form of a mediation clause or separate agreement
  • mediation agreement in writing would mean if it is contained in or recorded as,
    • any document signed by the parties;
    • an exchange of communications or letters including through electronic form as provided under the Information Technology Act, 2000;
    • any pleadings in a suit or any other proceedings in which existence of mediation agreement is alleged by one party and not denied by the other.
  • a reference in any agreement containing a mediation clause shall constitute a mediation agreement if the agreement is in writing and the reference is such as to make the mediation clause as part of the agreement.
  • Mediation Agreement pertaining to international mediation shall refer to agreement for resolution in matters which are under the ambit of “commercial dispute” as per the Commercial Courts Act, 2015.

B. Pre-litigation Mediation

• Voluntary act: Subject to the provisions of this Act, whether any mediation agreement exists or not, the parties before filing any suit or proceedings of civil or commercial nature in any court, may voluntarily and with mutual consent take steps to settle the disputes by pre-litigation mediation in accordance with the provisions of this Act.

Under section 5(1) of the Act, unless otherwise agreed upon, mediation can be conducted by a mediator who is:

• registered with the Council; or
• empanelled by a court-annexed mediation centre; or
• empanelled by a court-annexed mediation centre; or
• empanelled by an Authority constituted under the Legal Services Authorities Act, 1987; or
• empanelled by a mediation service provider recognised under this Act,
• shall conduct pre-litigation mediation.

Power of court or tribunal to refer parties to Mediation

• Notwithstanding the non-settlement of dispute under section 5(1) of the Act, the court or tribunal may at any stage of proceeding refer the parties to undertake mediation. In such a case, the Court or tribunal may pass suitable interim order to protect the interest of any party as it deems fit. The parties however are not under an obligation to come to settlement when such reference is being made.

Interplay with Commercial Courts Act, 2015 with respect to Pre-litigation Mediation

• Section 5 (1) of the Act contains a proviso which categorically states that pre-litigation mediation in matters of commercial disputes of Specified Value shall be undertaken in accordance with the provisions of section 12A of the CommercialCourts Act, 2015, and the rules made thereunder.
• Thus, the mandatory nature of Mediation under the Commercial Courts Act, 2015 is emphasised.

C. Appointment of Mediator

• As per section 8 of the Act, unless otherwise agreed upon by the parties, mediator may be of any nationality, provided that mediator of foreign nationality shall possess such qualification experience and accreditation as maybe specified.
• Parties shall be free to agree upon the name of mediator and the procedure for their appointment
• In case the parties do not reach any agreement, then parties seeking initiation of mediation shall make an application to amediation service provider (as specified under section 40 of the Act) for appointment. The mediation service provide shall within seven days appoint the mediator as agreed upon between parties or upon refusal, a mediator from the panel maintained by it with consent of the mediator.

D. Conflict of interest/ Disclosure stage

• Person appointed as mediator shall prior to the conduct of mediation, disclose in writing to the parties regarding any circumstance or potential circumstance, personal, professional, financial, or otherwise, that may constitute any conflict of interest or that is likely to give rise to justifiable doubts as to his independence or impartiality as a mediator or that which may arise during the mediation.
• Upon such disclosure being made the parties shall have the option to waive such objection in writing by all the parties.
• In case of termination of mandate of mediator, the replacement of mediator, in case of mediation other than institutional mediation, such party/parties may appoint another mediator within 7 days period from such termination. Upon termination of mandate of mediator under section 11 by mediation service provider, the mediation service provider shall then appoint a mediator within a period of seven days from such termination.

E. Territorial Jurisdiction

• Every mediation under this Act shall be undertaken within territorial jurisdiction of the court or tribunal of competent jurisdiction to decide the subject matter of dispute.
• Exception to the above rules is in case whereby the parties by mutual consent conduct mediation in any place outside the territorial jurisdiction or by way of online mediation.

F. Date of Commencement

• In case of existing mediation agreement, the date on which a party or parties receives notice from the party initiating the mediation, to refer such dispute to mediation.
• Where the parties have agreed to appoint amediator of their choice, on the date the mediator provides his consent to appointment.
• Where one of the parties applies to amediation service provider for settlement of disputes through mediation, the date of appointment of a mediator.

G. Time-limit for completion of Mediation

• The mediation under this Act shall be completed within a period of 120 days from the date fixed for the first appearance before the mediator.
• This period may be extended for further period as agreed by the parties but not exceeding 60 days.
• As per section 29 of the Act, while computing the period of limitation fixed for any proceeding relating to disputes in respect of which a mediation has been undertaken under this Act, the period from the date of commencement of mediation under section 14, and up to (i) submission of report under section21; or (ii) termination of mediation under section 24 shall be excluded.

H. Mediated Settlement Agreement

• The Mediated Settlement Agreement between parties shall include any agreement in writing between some or all of the parties resulting from mediation, settling some or all of the disputes between such parties, and authenticated by the mediator provided that the terms of the mediated settlement agreement may extend beyond the disputes referred to mediation.
• The Mediated Settlement Agreement should be necessarily reduced to writing and signed by parties.
• It includes the settlement agreement resulting from online mediation.
• The Mediated Settlement Agreement for the purpose of record may at the option of parties be registered with an Authority constituted under the said Act, or any other body as may be notified by the Central Government, in such manner as may be specified and such Authorityor body shall issue a unique registration number to such settlement agreements. The Authority shall be within the territorial jurisdiction of the court or tribunal of competent jurisdiction to decide the subject matter of dispute.
• The registration of Mediated Settlement Agreement shall not affect the rights of the parties for enforcement or challenge of the same.
• Such registration may be made by parties or mediation service provider within 180 days from the date of receipt of authenticated copy of mediation settlement agreement. In case of expiry of the aforesaid 180 days payments of such fees as may be specified shall become payable.

I. Non-settlement report

• Subject to provisions of section 26, in case no settlement agreement is arrived between the parties, within a period of maximum 120 days or further period of 60 days if extended, the mediator shall in case of institutional mediation submit a no-settlement report in writing to mediation service provider.
• In case of no settlement, in all other cases the mediator shall prepare a non-settlement report and provide signed copy to all the parties.
• The Non-settlement report shall however not disclose the cause of non-settlement, or any other matter or thing referring to conduct during mediation.

J. Enforcement of Mediated Settlement Agreement

• The Mediated Settlement Agreement signed by parties and authenticated by the mediator shall be final and binding on the parties and persons claiming under them.
• The Mediated Settlement Agreement subject to challenge under section 28 of the Act shall been forced in accordance with the provisions of Code of Civil Procedure, 1908 in the same manner as if it were a judgment or decree passed by a court.
• The parties or persons claiming through them may rely on the same by way of defence, set off or otherwise in legal proceedings.

K. Challenge to Mediated Settlement Agreement

• The party/parties seeking to challenge the Mediated Settlement Agreement may file an application before the court or tribunal of competent jurisdiction.
• The grounds for the challenge are:
  • Fraud
  • Corruption
  • Impersonation
  • Where the mediation was conducted in disputes or matters not fit for mediation under section 6 of the Act
• The time-period within which such challenge can be made is within ninety days from the date on which the party making that application has received copy of mediated settlement agreement subject to provisions of section 19(3) of this Act.
• The Court or tribunal may entertain the application beyond the period of 90 days, if the applicant satisfied the said court or tribunal by stating sufficient cause which prevented from making application within time fixed.

PROMINENT FEATURES OF THE ACT

A. No retrospective applicability:

Section 56 states that the Act shall be applicable prospectively i.e., it shall not apply to, or in relation to, any mediation or conciliation commenced before the coming into force of this Act.

B. Overriding effect

Section 55 of this Act states that except enactments mentioned in the Second Schedule(such as The Cine-Workers and Cinema TheatreWorkers (Regulation of Employment) Act, 1981, The Industrial Disputes Act, 1947, The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, etc.) the provisions of this Act shall have overriding effect for conduct of mediation or conciliation notwithstanding anything inconsistent therewith contained in any other law for the time being in force, and any instrument having force of law.

C. Online Mediation

• Section 30 of this Act incorporates the provisions for online mediation which is in terms of technological advancements of this age thus proving to be accessible, convenient, cost-effective in its truest sense.
• Online mediation is a process in which a neutral third-party mediator assists disputing parties in reaching an agreement through internet-based platforms and technology.
• Online mediation including pre-litigation mediation may be conducted at any stage of mediation under this Act, with the written consent of the parties including by the use of electronic form or computer networks but not limited to an encrypted electronic mail service, secure chat rooms or conferencing by video or audio mode or both.
• While conducting online mediation it should be under circumstances which ensure that the essential elements of integrity of proceedings and confidentiality are maintained at all times and the mediator may take such appropriate steps in this regard as he deems fit.
• Section 22 of the Act states that Confidentiality shall be maintained with respect to the mediation proceedings which inter alia includes
  • acknowledgements, opinions, suggestions, promises, proposals, apologies and admissions made during the mediation,
  • acceptance of, or willingness to, accept proposals made or exchanged in the mediation;
  • documents prepared solely for the conduct of mediation or in relation thereto;
  • any other mediation communication;
  • no audio or video recording of the mediation proceedings shall be made or maintained by the parties or the participants including the mediator and mediation service provider, whether conducted in person or online.
• Online mediation will prove beneficial since a mediator of foreign nationality can be appointed. The Explanation to Section 13 of this Act clarifies that where the parties agree to conduct the mediation online, for the purpose of enforcement, challenge and registration of the mediated settlement agreement, the same shall be deemed to have been undertaken within the territorial jurisdiction of the court or tribunal of competent jurisdiction.

D. Court-Annexed Mediation:

• This means mediation including pre-litigation mediation conducted at the mediation centres established by any court or tribunal.
• The court-annexed mediation centre and an Authority constituted under the Legal Services Authorities Act, 1987, shall maintain a panel of mediators for the purposes of pre-litigation mediation.

E. International Mediation:

• The applicability of this Act extends to international mediation which include those mediation undertaken under this Act and relates to a commercial dispute arising out of a legal relationship, contractual or otherwise, under any law for the time being in force in India, and where at least one of the parties, is
  • an individual who is a national of, or habitually resides in, any country other than India; or
  • a body corporate including a Limited Liability Partnership of any nature, with its place of business outside India; or
  • an association or body of individuals whose place of business is outside India; or
  • the Government of a foreign country.

F. Community Mediation:

• Section 3 (b) of the Act defines “community mediator” means a mediator for the purpose of conduct of community mediation as per section 43of the Act which may be applicable for settlement of any dispute likely to affect peace, harmony and tranquility amongst the residents or families of any area or locality, with prior mutual consent of the parties to the dispute.
• For settlement of dispute by this mode parties shall make an application before the concerned Authority constituted under the Legal Services Authorities Act, 1987 or District Magistrate or Sub-Divisional Magistrate in areas where no such Authority has been constituted, for referring the dispute to mediation.
• The panel shall consist of three community mediators the criteria for appointment of such mediators has been stated in sub-section 5 of section 43.
• In every case where a settlement agreement is arrived at through community mediation under this Act, the same may be reduced into writing with the signature of the parties and authenticated by the community mediators, a copy of which be provided to the parties.
• In cases where no settlement agreement is arrived at, a non-settlement report may be submitted by the community mediators to the Authority or the District Magistrate or the Sub-Divisional Magistrate, as the case may be, and to the parties.
• Any settlement agreement arrived at under Community mediation shall not be enforceable as a judgment or decree of a civil court.
• The provisions as to registration of mediated settlement agreement under section 20 of the Act shall be applicable to any settlement agreement reached between parties under community mediation.

G. Consequential Amendments in other Acts:

The following Acts have come to be amended in accordance of the below mentioned provisions of this Act:

• Motor Vehicles Act, 1988 (“MVA”) (as mentioned in Section 5(6) of the Act): The provisions in the MVA are amended to the extent that when an application for compensation arising out of an accident is made before the Claims Tribunal, if the settlement as provided for in section 149 of MVA is not arrived at between the parties, the Claims Tribunal shall refer the parties for mediation to a mediator or mediation service provider under this Act.
• Indian Contract Act, 1872 (“ICA”) (amended as per Third Schedule read with section 58): Exceptions have been added to section 28 of the ICA whereby a contract to refer a dispute to arbitration or mediation shall not be rendered illegal.
• Code of Civil Procedure, 1908 (“CPC”) (amended as per Fourth Schedule read with section 59): Section 89 of CPC has been amended whereby when the Court refers the parties to mediation, to the court-annexed mediation centre or any other mediation service provider or any mediator, as per the option of the parties thereafter the provisions of the Mediation Act, 2023 shall apply as if the proceedings for mediation were referred for settlement under the provisions of the MediationAct 2023.
• Legal Services Authorities Act, 1987 (“LSA”) (amended as per Fifth Schedule read with section 60): Section 4(f) of the LSA has been amended to read as “(f) encourage the settlement of disputes, including online by way of negotiations, arbitration, mediation and conciliation.”
• Arbitration and Conciliation Act, 1996 (“A&C”) (amended as per Sixth Schedule read with section 61): Section 61 of A&C is amended to inter alia state that any provision in any other enactment providing for resolution of disputes through conciliation in accordance with the provisions of the A&C Act shall be construed as reference to mediation as provided under the Mediation Act, 2023. Conciliation under A&C Act and CPC shall be construed as mediation referred to in clause 3(h) of the Mediation Act.
• Further notwithstanding anything contained in section 61, any conciliation proceeding initiated in pursuance of sections 61 to 81 of A&C Act as in force before the commencement of the Mediation Act, 2023, shall be continued as such, as if the Mediation Act, 2023, had not been enacted.
• Micro, Small and Medium Enterprises Development Act, 2006 (“MSME”) (amended as Companies Act 2013, (“Companies Act”)(amended as per Eight Schedule read with section 63): The provisions in Companies Act are amended to an extent that under section 442 of the Companies Act any party at any time may apply to the Central Government, Tribunal or the Appellate Tribunal, as the case may be, in such form along with such fees to refer the matter for Mediation or the Central Government, Tribunal or the Appellate Tribunal may suo moto in a proceeding pending before it may refer the matter to mediation in accordance with the provisions of Mediation Act, 2023. Following which in case there is Mediated Settlement Agreement, the mediator or mediation service provider shall file the mediated settlement agreement arrived at between the parties with the Central Government or the Tribunal or the Appellate Tribunal under the Act. The Central Government or the Tribunal or the Appellate Tribunal shall pass an order or judgment making the said mediated settlement agreement as part thereof.
• Commercial Courts Act, 2015 (“CCA”) (amended as per Ninth Schedule read with sec 64): The provisions in CCA are inter alia amended to an extent that the mediated settlement agreement arrived at shall be dealt with in accordance with the provisions of sections 27 and 28 of the Mediation Act, 2023.
• Consumer Protection Act, 2019 (“CPA”)(amended as per Tenth Schedule read with sec 65): The provisions in CPA are amended inter alia to state that reference under section 37 shall be accordance with the provisions of the Mediation Act 2023.

Disclaimer

The information provided in this article is for informational purposes only and should not be construed as legal advice. The content is based on my understanding of the Mediation Act 2023, and laws and regulations may have changed since that time.
This article does not establish or constitute an attorney-client relationship between the author and the reader, nor is it a substitute for professional legal advice. If you have specific legal questions or concerns related to the Mediation Act or any other legal matter, it is recommended that you consult with a qualified legal professional who can provide tailored guidance based on your individual circumstances.
The authors disclaim all liability for any loss, damage, or inconvenience arising out of your use or reliance on the information provided in this article. You should undertake your research and seek legal advice as needed to make informed decisions regarding the Mediation Act or any related legal matters.