Mediation: More Myths Busted

In the annals of Indian mediation literature, the column “Mediation Myth Busters 101” (Column) shall be surely something of a record. The Column has been authored by Mr. Anuroop Omkar and Ms. Kritika Krishnamurthy. In July 2016, I was trained by them during the course of 40 hours Training Program on Civil & Commercial Mediation & Negotiation. In the Column, the authors have lucidly dealt with mediation. Discussions on mediation invariably steer clear of two areas. First, the law on mediation and second, the enforcement of mediation settlements. However, it is heartening that the Column spells out the headings, “Law on Mediation” and “Enforcement of Settlements”. By refusing to shy away from these territories, the Column has marched miles ahead of the bulk of Indian mediation literature.

Why am I writing this piece?

While dealing with the heading “Law on Mediation”, the Column correctly observes as under:

 “Many requests to mediate a pre-litigation dispute are responded back with the reply that there is no law governing mediation in India and hence, a dispute cannot be mediated before it reaches the court.”

This is a real problem. It has been identified with precision in the Column. It is comforting that the Column attempts to explore a solution to this problem. It does so by:

• Naming many jurisdictions of the world and stating that they promote pre-litigation mediation.


• Stating that most of these countries have pre-litigation mediation since a long time.


• Stating that the settlement agreements arising out of such mediations are lawful.


• Stating that most of these jurisdictions did not have a written law on mediation till very recently.


• Stating that many of these jurisdictions still do not have a written law on mediation.


• Concluding that pre-litigation mediation is very much a lawful process, as what is not expressly forbidden is allowed.

I say this with respect that the said solution does not satisfy my conscience, due to the following reason:

Many requests to mediate pre-litigation disputes face the response that there is no law governing mediation in India, and hence, a dispute cannot be mediated before it reaches the court. Nothing in this solution counters the view that there is no law governing mediation in India, and hence, a dispute cannot be mediated before it reaches the court.

That’s the first reason as to why I am writing this piece.

While dealing with the heading “Enforcement of Settlements”, the Column correctly observes as under:

“There is a high perception among disputants in India that mediation will not work because the settlement agreements do not have the enforceability of an arbitral award or a judicial order.”  

This is also a real problem. It has been identified with accuracy in the Column. It is yet again reassuring that the Column attempts to explore a solution to this problem. It does so by:

• Looking at the problem from another angle, i.e., in mediation, there is no compulsion to participate or settle.


• Stating that any party can walk out of the process anytime if it thinks that the process is not working out for it.


• Stating that the parties execute a settlement agreement only if they are completely sure that they wish to settle the dispute.


• Stating that if a party does not intend to settle the dispute and wishes to delay conclusion, it will refuse to settle the dispute and as a consequence, refuse to execute the settlement agreement.


• Stating that we need an enforcement mechanism for decisions that are imposed on us by a third party.


• Stating that when we ourselves are convinced that a dispute can be resolved through settlement, we are more likely to do what is written in the settlement agreement.


• Stating that it is true that if a party does not comply with the terms of settlement, the other party will have to approach the appropriate court, to enforce the contract.


• Asking that do you forever stop driving your car because you had an accident.


• Concluding that you cannot stop settling all your disputes through mediation just because one party defaulted on the settlement terms.

I say this with respect that the said solution does not satisfy my conscience, due to the following reason:

If the enforcement of a mediation settlement is going to be as treacherous as contract enforcement, then, the high perception among disputants in India that mediation will not work because the settlement agreements do not have the enforceability of an arbitral award or a judicial order; is not just unavoidable but to a certain extent quite justified. All the merits of mediation enlisted under the heading “Enforcement of Settlements” in the Column cannot outweigh the need for ease of enforcement of mediation settlements.

That’s the second reason as to why I am writing this piece. The Column could have caused me to write this piece, but that does not make this piece a row.

Indian Mediation Law

In this piece, I shall be exploring Indian mediation law (including enforcement of mediation settlements). I shall be doing so in 2 parts. The first part shall explore Indian mediation law in respect of court-referred mediation and enforcement of settlements arising out of such mediations. The second part shall explore Indian mediation law in respect of private mediation and enforcement of settlements arising out of such mediations.

Indian mediation law in respect of court-referred mediation and enforcement of settlements arising out of such mediations

You may read this for a comprehensive analysis of the legal framework which applies to court-referred mediation in India and enforcement of settlements arising out of such mediations. In this piece, it would be sufficient to sum up the legal framework which applies to court-referred mediation in India and enforcement of settlements arising out of such mediations. The said legal framework is as under:

1. Court-referred mediations are necessarily under Section 89 of The Code of Civil Procedure, 1908 (CPC). Such mediations are squarely covered by the rules made by High Courts in exercise of their rule-making power subject to modifications, if any, which may be considered relevant to Civil Procedure Alternative Dispute Resolution and Mediation Rules, 2003 (ADR Rules), Civil Procedure Mediation Rules (Mediation Rules), the manuals of procedure for ADR and The Legal Services Authorities Act, 1987 (LSA). 


2. As per the law laid down by Hon’ble Supreme Court of India in Afcons Infrastructure Limited and another versus Cherian Varkey Construction Company Private Limited and others (Afcons) ((2010) 8 SCC 24):
   
   
   
   • Where a dispute has been referred for mediation by a court, the court shall refer the dispute to a suitable institution or person and such an institution or person shall be deemed to be a Lok Adalat.
   
   
   • All the provisions of LSA shall apply as if the dispute were referred to a Lok Adalat under the provisions of LSA.
   
   
   • Court-referred mediation will be governed by LSA.
   
   
   
   

As per Afcons, till the time the legislature does not correct the draftsman’s error in Section 89 of CPC by interchanging the word “mediation” in Section 89(2)(d) of CPC with the words “judicial settlement” in Section 89(2)(c) of CPC, the aforesaid is the legal framework applicable to court-referred mediations under the auspices of Section 89 of CPC. As the legislature has not yet corrected the mistakes to this date, the aforesaid legal framework is applicable to court-referred mediation under the auspices of Section 89 of CPC.

3. As much as court-referred mediations will be deemed to be a reference to a Lok Adalat, in view of Afcons, the        court retains its control and jurisdiction over the matter, as identified in Afcons; hence, Afcons mandates that           the mediation settlement will have to be placed before the court for recording the settlement and disposal.

4. As per Afcons, whenever such a settlement is placed before the court, it shall apply the principles of Order              XXIII Rule 3 of CPC (Compromise of suit) and make a decree/order in terms of the settlement, in regard to the          subject-matter of the suit/proceeding.

Thus, there is no question of enforcing the mediation settlement as a contract, as the court is required to apply the principles of Order XXIII Rule 3 of CPC and make a decree/order in terms of the settlement, in regard to the subject-matter of the suit/proceeding.

5.  As per Afcons, in regard to matters/disputes which are not the subject-matter of the suit/proceedings, the              court will have to direct that the settlement shall be governed by Section 21 of LSA. By virtue of the said                      provision, a mediation settlement shall be deemed to be a decree of a civil court/an order of any other court                  and it shall be final and binding on all the parties to the dispute and no appeal shall lie to any court against it.

Thus, there is no question of enforcing the mediation settlement as a contract, as it is deemed to be a decree of a civil court/an order of any other court and it shall be final and binding on all the parties to the dispute and no appeal shall lie to any court against the award.

6.  As per Afcons, the court will have to direct that the settlement shall be governed by Section 21 of LSA, it is                only then that such settlements will be effective.

The foregoing clarifies the prevalent law on court-referred mediation as well as enforcement of settlements, which are a product of such mediations.

Indian Mediation Law in respect of private mediation and enforcement of settlements arising out of such mediations

If the parties to a dispute opt for mediation de hors a court reference, it is called a private mediation. If the parties to a dispute opt for mediation before one party sues the other party or before they sue each other, i.e., with no occasion for a court to refer the dispute for mediation; then, it is called a pre-litigation mediation. Pertinently, in private mediation as well as in pre-litigation mediation, the mediator is not appointed by the court. Therefore, I am of the view that pre-litigation mediation is a variety of private mediation.

The sole question which arises is:

Do CPC, ADR Rules, Mediation Rules, the manuals of procedure for ADR and LSA apply to private mediation, which includes pre-litigation mediation?

In my view, the answer to the said question is that, it is clear that any private mediation including pre-litigation mediation is outside the scope of Section 89 of CPC, for the simple reason that the mediator is not appointed by the court. It follows as a logical corollary that ADR Rules, Mediation Rules, the manuals of procedure for ADR and LSA do not apply to any private mediation including pre-litigation mediation. In the context of private mediation, I would like to examine Mr. Sriram Panchu’s authoritative work on mediation i.e., “Mediation Practice & Law The Path to Successful Dispute Resolution”, Second Edition, 2015, Lexis Nexis.

Passage 1: (Sriram Panchu, “Mediation Practice & Law The Path to Successful Dispute Resolution”, Second Edition, 2015, Lexis Nexis at page 321)

“While court-annexed mediation has received quite a fillip in the last decade, the field of private mediation is yet to take off and it will be some time before its potential is realised and achieved. However, the legislative framework must be put in place to ensure its success when that time comes. Having established mediation centres in the Supreme Court, all High Courts and some district courts, there is a need to ensure that the process continues to move forward.”

My inference:

Based on the aforesaid passage, I infer that presently there is no legislative framework to ensure the success of private mediation. Thus, The Arbitration and Conciliation Act, 1996 (1996 Act) cannot be applied to private mediation.

Passage 2: (Sriram Panchu, “Mediation Practice & Law The Path to Successful Dispute Resolution”, Second Edition, 2015, Lexis Nexis at page 321)

“Currently, the law does not protect the title ‘mediator’. Mediators operating under the court mediation scheme are regulated by rules framed under the CPC but there is no regulation of mediators outside of the court mediation scheme. There is no requirement for training or certification, code of conduct or regulation of behaviour. These aspects are essential for the success of mediation.”

My inference:

Based on the aforesaid passage, I infer that presently there is no regulation of mediators outside of the court mediation scheme i.e., private mediation, presently there is no requirement for training or certification in private mediation, presently there is no code of conduct in private mediation or regulation of behaviour in private mediation. Thus, private mediation is faced with a legal vacuum.

Passage 3: (Sriram Panchu, “Mediation Practice & Law The Path to Successful Dispute Resolution”, Second Edition, 2015, Lexis Nexis at pages 321 & 322)

“In the arena of private mediation there is no provision in Arbitration and Conciliation Act providing the mediator immunity for things done or omitted to be done bona fide during the course of mediation. Nor is there a provision protecting a mediator from being compelled to testify regarding the mediation proceedings. The Model Civil Procedure Mediation Rules (which are the basis for the Rules adopted by the High Courts) provide in Rule 22 that a mediator is protected from civil and criminal liability and from having to be summoned by the court to testify as regards the mediation proceedings. Similar protection is required under the ACA.”

My inference: Based on the aforesaid passage, I infer that for private mediation, 1996 Act as it stands now, is so ill-equipped that a private mediator is not protected.

Passage 4: (Sriram Panchu, “Mediation Practice & Law The Path to Successful Dispute Resolution”, Second Edition, 2015, Lexis Nexis at page 322)

“The laws governing private mediation also do not provide for an extension of the limitation period for a dispute under mediation. Section 77 of the ACA provides for a bar to arbitral or judicial proceedings during conciliation proceedings in respect of a dispute that is the subject matter of the conciliation proceedings with the exception that a party may initiate such proceedings where they are necessary for preserving his rights. However, this is insufficient for promoting mediation as a serious alternative to litigation. While the bar to arbitral and judicial proceedings should remain, a provision should also be inserted for extension of limitation period for a dispute that is being mediated. This could be either an extension for the duration of the mediation proceedings, or a fixed period in addition to the statutorily provided limitation period providing extra time for mediation, or a combination of the two such as provided by Germany’s Mediation Code.”

My inference: Based on the aforesaid passage, I infer that for private mediation, 1996 Act as it stands now, is so ill-equipped that it is user-unfriendly.

The aforesaid inferences are as under:

(i) Presently there is no legislative framework to ensure the success of private mediation. Thus, 1996 Act cannot be applied to private mediation.

(ii) Due to the following reasons, private mediation is presently faced with a legal vacuum:

(a) Presently there is no regulation of mediators outside of the court mediation scheme i.e., private mediation.

(b) Presently there is no requirement for training or certification in private mediation.

(c) Presently there is no code of conduct in private mediation or regulation of behaviour in private mediation.

(iii) For private mediation, 1996 Act as it stands now, is so ill-equipped that a private mediator is not protected.

(iv) For private mediation, 1996 Act as it stands now, is so ill-equipped that it is user-unfriendly.

In view of my inferences from the passages detailed above, I beg to differ with Mr. Panchu’s case in favour of private mediation, which is as under:

“In India the Rules governing court-annexed mediation have a section on ethics to be followed by mediators such as confidentiality, the right to self-determination of parties in the process and upholding the integrity and fairness of the mediation process. The Arbitration and Conciliation Act 1996 which regulates other mediations does not have similar provisions; this is a deficiency that needs to be addressed. However, lack of legislation not withstanding, good practices mandate observance of these principles.”

(Sriram Panchu, “Mediation Practice & Law The Path to Successful Dispute Resolution”, Second Edition, 2015, Lexis Nexis at page 180)

As the mediator is not appointed by the court in pre-litigation mediation as well as in private mediation, the former is just a variety of the latter. Hence, my aforesaid inferences render a case against pre-litigation mediation as well.

In my view, the foregoing clarifies the prevalent law on private mediation, which includes pre-litigation mediation; as well as enforcement of settlements which are a product of such mediations.

A settlement agreement in a private mediation is not enforceable under Sections 73 and 74 of The Arbitration and Conciliation Act, 1996

Let us examine the curious case of Shri Ravi Aggarwal versus Shri Anil Jagota. In the said case, Mr. Virender Taneja was the private mediator. You may read this for a comprehensive analysis of Shri Ravi Aggarwal versus Shri Anil Jagota.

In Shri Ravi Aggarwal versus Shri Anil Jagota, (EFA (OS) No. 19 of 2009), the parties had reached a settlement agreement in a private mediation. Differences arose on whether the settlement had been acted upon. One party approached Hon’ble High Court of Delhi seeking enforcement under Sections 73 and 74 of 1996 Act. The court refused to do so, holding that the proceedings had not been duly commenced as a conciliation under Section 62 of 1996 Act. In his treatise, Mr. Panchu examines this judgment. He goes on to suggest that the matter should have been considered in a broader aspect and a settlement agreement reached by consent should have been given effect to. (Sriram Panchu, “Mediation Practice & Law The Path to Successful Dispute Resolution”, Second Edition, 2015, Lexis Nexis at page 305)

The fact remains that Hon’ble High Court of Delhi refused to enforce a settlement agreement in a private mediation under Sections 73 and 74 of 1996 Act. It follows as a logical corollary that a settlement agreement in a pre-litigation mediation, which is a variety of private litigation is also unenforceable under Sections 73 and 74 of 1996 Act. The only way to enforce it is by approaching the appropriate court and enforcing the settlement agreement as a contract, as suggested in the Column, which is treacherous and hence, practically unworkable. Considering the present statutory and judicial position in India, private mediation is unworkable. It follows as a logical corollary that pre-litigation mediation, which is a form of private mediation is also unworkable.

Merely because the state of affairs is such, would it be correct to say that private consensual dispute resolution, which includes pre-litigation consensual dispute resolution is unworkable?

The answer to the said question, in my humble view, is in the negative.

The answer lies in Part III of 1996 Act, which is a complete code in respect of conciliation, which, in law, can be resorted to without a court reference i.e., it is private and it can also be resorted to at the pre-litigation stage. It would not be out of place to mention that mediation and conciliation are not one and the same, in view of Indian statutory law and Afcons (please read this and this) as well as India’s stand before United Nations Commission on International Trade Law (UNCITRAL) vis-à-vis mediation (please read this).

Say, the parties to a dispute intend to opt for mediation in the following circumstances:

• de horsa court reference i.e., private mediation; or


• before one sues the other i.e., pre-litigation mediation (which is a variety of private mediation); or


• before they sue each other, i.e., pre-litigation mediation (which is a variety of private mediation);

I would advise them to simply opt for conciliation instead of a vague private mediation/pre-litigation mediation. The conciliation should be carried out strictly as per Part III of 1996 Act. Part III of 1996 Act being a code in itself when it comes to conciliation, would adequately take care of the parties, the mediator and the settlement agreement. Yes, Section 67(4) of 1996 Act prescribes that the conciliator may, at any stage of the conciliation proceedings, make proposals for settlement of the dispute and they need not be in writing and they need not be accompanied by a statement of the reasons therefor. However, the power to make proposals for settlement is directory and not mandatory. A conciliator can play a purely facilitative role, as much as he can also play an evaluative role by making proposals for settlement as per Section 67(4) of 1996 Act.

The future of private consensual dispute resolution, which includes pre-litigation consensual dispute resolution

Ministry of Law and Justice (Department of Justice) has, vide File No. 17/56/2017-NM dated 26 July 2017, called for a meeting on ‘Online Dispute Resolution’ through Mediation, on 3 August 2017. The department intends to make available an online dispute resolution mechanism through mediation for resolution of disputes regarding various services. The department’s intention to do so is laudable and promising. But what I find to be more laudable and promising are the far-reaching issues which shall be discussed in the meeting, as detailed in the notice, namely:

1. The framework adopted to endorse ADR nationally.


2. Fundamental issue constraining the growth of ADR in the country.


3. Role of ADR Mechanisms in expeditious justice delivery.


4. Use of Alternative dispute techniques as effective pre-litigation dispute resolution tool.


5. Providing incentives for referral to mediation and conciliation in line with global practices.


6. Facilitate Alternate Dispute Resolution Mechanisms to reduce the pendency in the formal judicial system.


7. Solving disputes speedily and effectively through ADR and Promoting access to justice.


8. Use of technology, and internet specifically to encourage arbitration/conciliation/mediation.

I am sure that in the said meeting, the aforesaid issues are considered in their proper perspective.

Arjun Natarajan is a litigator as well as an accredited and certified mediator (IIAM and IICA under the aegis of Ministry of Corporate Affairs – Government of India). He is empanelled with Ministry of Corporate Affairs in his capacity as an expert in mediation or conciliation who has successfully undergone training in mediation or conciliation. He is the founder of the blog https://onthesidelinesofgpcseriesindia2017.wordpress.com/