Introduction
Mediation is an alternate dispute resolution mechanism that involves a third party or collective individuals, acting as a third party that helps in arriving at a mutually agreed settlement. This mode of ADR mechanism has its roots embedded since time immemorial in the history of humankind. The Indian Judicial System was keen to adopt mediation due to its cost effectiveness, effortlessness and time efficient nature. There is also a popular opinion in the Indian market that commercial disputes can be settled amicably through the process of mediation which can result into the paradigm of “ease of doing business”.
The 253rd Law Commission Report recommended a forum dedicated to resolve complex commercial matters which was essential for economic developments. Following the steps of the law commission report, The Commercial Courts Act, 2015 came into force with the sole purpose of expeditious disposal of commercial suits through commercial courts. This same Act, has been revised via the 2018 amendment where it has been stated that a party requires to attempt intercession and to proceed with cooperation by undertaking remedies of mediation, prior to the commencement of court proceedings under the commercial courts. But there are various complexities in the realm of mediation which includes the role of the mediator as an adjudicator and a facilitator, the willingness of parties to mediate and enter into a settlement and so on.
This blog aims to explore the adoption of the concept of mandatory pre-institution mediation in India. It further analyses its development and addresses whether there are any complications faced since its inception till date. Lastly, this blog critically analyses the position of India with respect to Turkey and Italy.
Inception of Mediation in India
In the early 2000s, India experienced a great judicial activism by the Supreme Court through the induction of mediation as an ADR mechanism. The judgement of “Salem Advocate Bar Association vs Union of India AIR 2005 SC 3353” witnessed a pro-mediation stance for the first time. It went ahead and laid down an extensive procedures and rules (Model Mediation Rules) that would facilitate the conduct of mediation in India. Furthermore, in the matter of “Afcons Infrastructure Ltd vs Cherian Varkey Construction Co. (P) Ltd. (2010) 8 SCC 24”, the honourable Court interpreted section 89 of CPC and formed the opinion that in suitable cases or cases where there exist the elements of settlement such as commercial disputes can be referred to mediation.
> Background to the Commercial Courts Act 2015
188th Law Commission Report recommended the formation of fast-track courts, a division within the high courts. A 2009 bill was introduced in the parliament which later on went for a review for scrutinizing the scope of commercial disputes. The 253rd Law Commission Report recommended the setting up of commercial courts, commercial divisions and commercial appellate divisions of the high courts. The resultant was the enactment of the Commercial Courts Act 2015. The 2018 amended Act adds a requirement of conducting pre-institution mediation in cases where no urgent interim relief is sought.
> Mandatory Pre-Institution Mediation
Section 12 A of the Commercial Act 2015 lays down the provision that mandates the parties to exhaust the remedies of pre-institution mediation before instituting a suit of commercial nature. Therefore, the Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 aimed to bring clarity to the procedures of such pre-institution mediation under a strict time limit. But in the context of mediation, lack of inclusion of mediators from other domain is becoming more prominent. Several commercial disputes find difficulty in amicable settlement because of the lack of domain specific experts as mediators.
The authors have observed in certain cases that upon the discretion of the court, a party can initiate a court proceeding when they are in need of interim relief. In the matter of “GSD Constructions Pvt. Ltd vs Balaji Febtech Engineering”, the court suggested that there is no need of such mediation process and suggest the plaintiff to initiate the court proceedings as he was suffering irreparable loss and was in need of immediate interim relief whereas in the matter of “M/s M.K. Food Products vs M/s S.H. Food Products”, the court asked the plaintiff to opt for a pre-institution mediation process as the dispute between the two parties was concerned with an injunction on copyright infringement and therefore it was likely to get resolved through mediation.
However, if we look into the recent matter of “Ganga Taro Vazirani vs Deepak Raheja”, involves a simplified claim requiring the recovery of funds provided by the plaintiff to the defendant. No mediation was attempted, and the court concluded that it was not mandatory under section 12A. The court concluded that this requirement is procedural and that its material satisfaction is sufficient. Section 12A was deemed to be inconsistent with the purpose of this law in order to ensure a prompt resolution and thus can be waived. The court pointed out mechanically that the plaintiff to meet with the mediator under section 12A before allowing the plaintiff to file an institution of suit could contradict the speedy justice mechanism. Nevertheless, the court also observed that mediation will be of no use if one of the party arguments and claims are strong enough to win the case.
Comparative analysis of Mandatory Mediation in Turkey and Italy to that of India
The present scenario of pre-institutional mediation that is subsisting currently in India is somewhat similar to that of the Opt-Out Mediation Model, that Turkey and Italy has abided by, while practising mediation in their jurisdiction. Mediation is nothing but a lubricated form of negotiation between the parties, the abovementioned model vest rights upon the disgruntled party to opt out of the mediation mechanism and to opt for a judicial proceeding. Pre-litigation mediation today has become a controversial issue not only in India but also in several global jurisdiction including Turkey and Italy as to whether the countries should implement new mediation models or should expand the scope of their prevailing pre-trial mediation clauses in their agreement or should reform their existing laws suggesting voluntary mediation to clear the vagueness of pre-litigation mediation being mandatory or discretionary in nature.
In Turkey, the new legislation that has come into effect for commercial disputes from 2019 prescribes that the parties to a commercial dispute relating to pecuniary claims can only go to court if the pre-litigation mediation procedure has been completed and a final report is issued by the mediator denouncing the parties’ inability to resolve the dispute, that has been pronounced. The parties must resort to mediation first, otherwise the case will be dismissed for procedural reasons without further examination on their merits. Nevertheless, similar to the amendment of Commercial Courts Act of India in 2018, the Turkish law does not prohibit the parties from granting interim relief whenever needed by them. Mandatory mediation for commercial disputes tends to be prevailing still in Turkey and has been adopted by countries like Romania and Greece due to its higher success rate in solving disputes between the parties.
The rate of success of mediation in Italy was not of a great ease before changes was bought into mediations laws by the Parliament of Italy in 2013. The new amended law mandates all the practicing lawyers over there to participate in mediation procedures. The amended law tends to promote the mechanisms of mandatory mediation by removing all kinds of hostility and making the understanding reached between parties binding and duly signed by them. As per the reports about 8% of commercial and civil disputes cases arising in Italy has to go for mandatory mediation while others are voluntary in nature. However, the unsatisfied party always have the option of choosing court proceedings not in between but only after the completion of the mediation procedure.
“Chart representing comparative study of Mandatory mediation prevailing in India, Turkey and Italy: –
| Points of
Difference |
India | Turkey | Italy |
| General rule | Pre-institution mediation in India mandates for a mandatory mediation procedure before filing a case before commercial courts. | Parties are bound to mediate before filing a suit governing monetary claims. | Mediation is mandatory for disputes governing banking, finances, loans, leases, real estate, family law etc. |
| Mandatory Criteria (If any) | On receipt of the application, the authorities send a notice to both the parties for appearance within 10 days. Non-appearance of the opposing party within the stipulated time period tends to cease the whole procedure. | The case shall not be entertained in court if the parties fails to go through mediation. | The legal representatives of the parties involved in the case needed to be present even if the party members are not present. |
| Exceptions
(If any) |
There are limited exceptions for claims that require urgent interim reliefs and measures, and the opposing party can restrict the process if they want to. | In cases that are in need of interim relief and in if it has arbitration clauses. | None. Exceptions are only for the ones which are not listed for mediation their Decree. |
| Time period | The process is time effective as it has to be completed within three months from the date of application.
However, extension of the time period up to 2 months can be given if the parties agrees to. |
The procedure tends to complete within a short span of time, generally within 3 weeks. | The procedure generally completes within 30 days extension is given for maximum of 90 days |
| Costs | The amendment tends to lower the cost expenditure of the parties from one crores (approx.) if they have opted for judicial proceeding to 3 lacs (approx.) in mediation. | Lower than judicial proceedings in their jurisdiction. | The parties who are not being able to reach any kinds of settlement has to bear cost consequences for their judicial proceedings. |
| Sanctions (If any) | None | The parties would be liable if they are not present in the mediation procedure. | If the plaintiff is not present in a session the judge may sanction that plaintiff in the next court proceeding. |
> At this juncture the question arises as to what is the scope of pre-institution mediation in India and where does it stands with respective to the mediation models followed in Turkey and Italy?
The 2018 amendment that introduced section 12A in the Act, changes the mechanism for resolving commercial disputes and reduces the burden on courts by compulsory pre-institution mediation mechanisms. Although loopholes are present in the section. It is essential to ensure that mediation in India does not follow the same path as arbitration in its early years. As discussed before, the process of pre-institution in India is mandatory and one has to opt for it before entering the premises of Commercial courts.
In India, the misinterpretation of the word urgent has circumvent parties to opt mediation. There are very few pre-institution mediation implementation instruments, and no mediator qualification standards have been set in the provision. Turkey mandates training programme for the mediators and make them eligible to settle the disputes. The behaviour of the mediator should be subject to appropriate quality control. There are very few pre-institution mediation implementation mechanisms, and no mediator qualification standards have been set in India. In order to initiate the initial procedures of mediator, the government should implement more external mediation centres. Since the system is more informal in nature, the mediators should rely upon more admissible evidences confidentially in order to provide justice for the one who deems fit in order to make the mediation fruitful. As per reports, India lacks in giving statistical insights over the disputes that has been suggested for mediation, unlike Turkey and Italy.
Conclusion
The pre-institution mediation process in India in matters related to commercial disputes require a lot of refinement. The dynamism of mediation is in the right direction and improving the mediator’s capacity to mediate through training will be helpful to some extent. A robust mediation procedure can also improve in the area of the party’s willingness to enter into mediation and making it a success. Judicial sensitisation at all levels, where there tends to exists the need and purpose of mediation to make it a main stream option in ADR mechanism. A successful implementation of mandatory mediation can have a dramatic influence over the burden of the courts. It would only be one of several crutches required to revitalise the Indian judicial system as a whole.
References
1. Sai Ramani Garimella & M. Z. Ashraful, The Emergence of International Commercial Courts in India: A Narrative for Ease of Doing Business, 12 Erasmus L. REV. 111 (2019).
2. V. K. Ahuja, The Singapore Convention on Mediation and India, 11 INDIAN J.L. & Just. 19 (2020).
3. Sudhir Krishnaswamy & Varsha Mahadeva Aithala, Commercial Courts in India: Three Puzzles for Legal System Reform, 11 J. INDIAN L. & Soc’y 20 (2020).
4. Abhijeet Srivastava, Mandatory Pre-Litigation ‘Commercial’ Mediation: Turkey’s Lesson for India, 1 NUJS JODR 2 (2021).
| Author: Swastika Mukherjee BBA.LL.B (Hons) KIIT, School of Law Contact: 9674217560 Email id: swastika362k@gmail.com |
Co-Author: Adrish Dutta BBA.LL.B (Hons) KIIT Law School, Kolkata Contact: 7980503295 Email id: adrishdutta2468@gmail.com |
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