[By Krishnanunni U and Kessia E. Kuriakose]
The authors are students at the NALSAR University of Law, Hyderabad.
The outbreak of the COVID-19 pandemic has led to a sudden surge in the number of commercial disputes across the world. Most corporates have been inundated with unprecedented challenges arising out of delayed performance of contracts. At this juncture, the amicable restructuring of contracts to accommodate contemporary realities becomes ever pertinent. Hence, mediation being quicker and efficient than conventional modes of dispute resolution will automatically become the preferred option for businesses to tackle the predicament posed by COVID-19. Further, mediation will help in fostering relations by settling disputes amicably.
In India, COVID-19 has brought about various developments that have set the stage for propelling mediation to the forefront. For example, insolvency proceedings have been terminated for a year and RERA has extended the timeline for completing projects by including COVID-19 as one of the force majeure conditions. Litigating disputes connected to COVID-19 will consume time, money, and effort. Mediation being cheap, quick, and confidential would be the most feasible solution to tackle the conundrum. However, blindly accepting mediation as the solution can have serious repercussions. Mediation in India is marred with a lot of problems, lack of legal sanctity being the primary concern. In this article, we seek to identify and provide recommendations to resolve the challenges faced by mediation in India by carefully analyzing the existing legal framework around mediation.
Existing Legal Provisions
Mediation in India is primarily governed by two legislative acts viz. the Code of Civil Procedure, 1908 (“CPC”) and the Arbitration and Conciliation Act, 1996 (“ACA”). Section 89 of the CPC (added by way of amendment in 1996) gave courts the power to direct disputes to various ADR mechanisms including mediation for their settlement. Part II of the Civil Procedure – ADR Rules 2003 clearly defines the process of Mediation and specifies certain rules related to mediation (Mediation Rules). Further, Part III of ACA governs conciliation proceedings that courts have interpreted to be synonymous with the mediation process. In addition to that, several legislations like the Companies Act, 2013, and Commercial Courts Act, 2015 provide for mediation, but these rarely opt for dispute resolution. Hence, it is very apparent that laws governing mediation in India are in a rudimentary stage with no standardized process in place.
Recently, the government has taken affirmative actions for promoting mediation but the absence of an overarching legislation will continuously pose impediments for the growth of mediation in India. Initial efforts to strengthen mediation can be traced back to 1988 where the 129th Law Commission Report recommended ‘Urban Legislation Mediation’ as an alternative to adjudication. Afterward, the judgment in Salem Bar Association v. Union of India held that all disputes coming to court need not necessarily be resolved by the courts and alternative dispute resolution mechanisms should be actively engaged. This prompted an amendment to the CPC and Section 89 was incorporated. Another major development was an amendment to the Commercial Courts Act, wherein Section 12A was introduced in 2018. This made it mandatory for parties to conduct mediation before instituting a commercial dispute. The constitution of the “The Mediation and Conciliation Project Committee” entrusted with discussing policy matters related to mediation has given further impetus to the development of mediation.
In 2019, India signed the United Nations Convention on Mediation (the Singapore Convention), which made international commercial mediation agreements enforceable in India. However, the qualms regarding enforcement can be fully dismissed only when a new law concerning mediation is enacted.
Challenges and Recommendations
1) Lack of Codification– In January 2020, the apex court in MR Krishna Murthi v. New India Assurance Co. Ltd pointed out the urgent need for enacting a uniform legislation for mediation in India. In furtherance to this, the court set up a committee to come up with a draft legislation that will help in conferring legal sanctity to disputes settled by mediation. A uniform statute governing mediation is the need of the hour. Such legislation should ideally aim at making mediation a mandatory exercise before approaching courts or arbitral tribunals. This would help in altering the current status of mediation from being a particular form of dispute resolution to the mandatory first stage of dispute resolution.
A statute governing mediation will also address the enforceability concerns plaguing mediation in India. Even in the landmark Ayodhya case, the Supreme Court had initially directed the parties to mediation. However, the lack of a binding factor has deterred parties from acknowledging mediation, thereby vitiating mediation proceedings in India. An overarching legislation would confer legal sanctity and provide procedural guidance to parties. Just like how the ACA revolutionized the arbitration culture in India, a mediation specific law can instill confidence in parties to resolve their disputes through mediation.
2) Apprehension towards mediation & Lack of Awareness – Mediation has never garnered sufficient reception among the legal fraternity. In order to popularize mediation as a dispute resolution mechanism, training sessions and seminars should be conducted to familiarize judges with the benefits of mediation. This will help in creating a conducive environment for the growth of mediation in India. Further, public awareness related to mediation should also be increased. A coordinated approach by the Judiciary and the Executive can help in disseminating information regarding the benefits of mediation to the public. Lawyers should also be encouraged to advise mediation to their clients.
3) Infrastructural Concerns and Quality Control– Improved emphasis on mediation will directly increase the workload on mediation centers which lack administrative strength. This can lead to the languishing of cases that go against the basic tenet of mediation i.e. fast resolution of disputes. To tackle this, the practice of mediation should be professionalized in India. People should be incentivized to become full-time mediators. The recent proposal of the Bar Council of India to compulsorily include mediation in the legal curriculum will definitely assist law students in taking up a career in mediation. Further, it is pertinent to supplement the growth of mediation with the establishment of a regulatory body onerated with quality control. It is crucial to maintain the quality of mediators by subjecting them to regular training sessions. The ultimate goal should be to develop a formal institution for accrediting mediators and framing training programs.
4) Inconsistency between existing laws on Mediation– The Supreme Court in M/s Afcons Infra. Ltd. & Anr. v. Cherian Varkey Construction Co. Pvt. Ltd stated that the terms ‘mediation’ and ‘conciliation’ are synonymous with each other. Contrastingly, the language of Section 89 of CPC shows that the legislative intent behind the section was to differentiate between mediation and conciliation. Thus, the existing ambiguity has created a lot of vagueness in the process of mediation.
Another cause for uncertainty within the existing framework is the newly introduced Section 12A of the Commercial Courts Act. It envisages a compulsory mediation process in an attempt to resolve the dispute out of court. However, the section also provides for an exemption in cases where an ‘urgent interim relief’ is sought. Lawyers tend to exploit this exemption by admitting even the most frivolous cases as they do not trust the process of mediation. Therefore, uniform legislation is required to tackle the inconsistencies that exist with the present laws.
Conclusion: The Way Forward
The COVID-19 pandemic has increased the prominence of mediation as a means for dispute resolution. The plethora of cases initiated by the pandemic warrants a swift and effective redressal and mediation can be the perfect solution. However, as discussed above, there are a lot of challenges that restrict the effectiveness of mediation. The existing framework of having different mediation rules for different High Courts has further contributed to the element of uncertainty in the mediation process. Thus, the most important step towards recognizing mediation as an effective tool for resolution would be to enact a statute solely for mediation.
The statute should strive towards addressing the concerns of enforcement and quality control. However, care and precaution should be taken to ensure that the legislation does not intrude into the autonomy of the parties engaging in mediation. The enactment should supplement the flexible nature of mediation and should help in standardizing the procedures involved in mediation. Further, attempts should be made to promote mediation by making it a mandatory step before litigation. The future of mediation in India is heavily dependent on the prospective legislation on mediation. The codification seems rather imminent for India due to the ability of mediation to settle disputes cordially and expeditiously.