Arbitration and Mediation Compared

Since 2023 the two processes have separate statutes. Arbitration is governed by the Arbitration and Conciliation Act, 1996 and mediation by the Mediation Act, 2023, and each supplies its own machinery for beginning the process, conducting it, enforcing the outcome and attacking it. The distinction of principle is unchanged: the arbitrator decides and the mediator does not. What has changed is that the comparison is now between two complete regimes rather than between two chapters of one Act.

The two statutes on the points that matter, and the two places they are combined

1. The Difference of Principle

An arbitral tribunal hears both sides and determines their rights. Its authority comes from the arbitration agreement, but once conferred it is exercised against a party who may by then be unwilling, and the award binds whether or not that party accepts it. A mediator assists the parties to reach their own agreement. Section 3(h) of the Mediation Act, 2023 defines him as a person who does not have the authority to impose a settlement, and if either party withholds agreement there is no outcome at all.

Every other difference follows. Because the arbitrator decides, he must hear both sides on all the material and may not receive information from one party behind the back of the other; because the mediator does not decide, the private session is his principal technique. Because the award is an adjudication, it must state reasons under Section 31(3); because the settlement is an agreement, it records terms and not findings.

2. The Comparison in Detail

Basis	Arbitration	Mediation
Governing statute	Arbitration and Conciliation Act, 1996	Mediation Act, 2023
How it begins	An arbitration agreement in writing under Section 7, invoked by a notice under Section 21	Voluntary pre-litigation mediation under Section 5, or a reference by a court under Section 7; a mediation agreement is not essential
The neutral	A tribunal of one or three, appointed under Sections 10 and 11	A mediator appointed by agreement or by a mediation service provider
Function	Hears and determines	Assists; no authority to impose a settlement
Private meetings	Not permitted; a breach of Section 18	The ordinary technique of the process
Time	Twelve months from completion of pleadings, Section 29A	120 days from the first appearance, extendable by 60, Section 18
Outcome	An arbitral award, Section 31	A mediated settlement agreement, Section 19
Enforcement	As a decree under Section 36	As a judgment or decree under Section 27
Challenge	Setting aside under Section 34, on the stated grounds	Section 28: fraud, corruption, impersonation or a dispute not fit for mediation, within ninety days
Confidentiality	Section 42A, with an exception for enforcement	Sections 22 and 23, with an inadmissibility bar
Limitation	The Limitation Act applies through Section 43	The period spent in mediation is excluded, Section 24
If it fails	The tribunal decides in any event	A non-settlement report under Section 20; the claim is unaffected

3. Where the Two Are Combined

Settlement during the arbitration. Section 30 provides that it is not incompatible with an arbitration agreement for the tribunal to encourage settlement, and permits it, with the agreement of the parties, to use mediation at any time during the proceedings. A settlement so reached is recorded as an award on agreed terms, which has the same status and effect as any other award and is enforced under Section 36.
Mediation before a commercial suit. Section 12A of the Commercial Courts Act, 2015 requires a plaintiff who does not contemplate urgent interim relief to exhaust pre-institution mediation before filing. The requirement applies to a suit and not to an arbitration, so a party with an arbitration clause proceeds directly to the reference.
Multi-tier clauses. A contract may require negotiation and then mediation before arbitration may be invoked. The earlier tiers are enforceable as part of the bargain, though the court will not allow them to be used for delay where compliance has become an empty formality.
Med-arb. Where the same person is to mediate and then arbitrate, the difficulty is that he will have received information in private sessions which the other side never saw. The safe arrangements are a different neutral for the second stage, or an arb-med-arb protocol under institutional rules.

⚠ Compulsion operates differently in the two processes

A court may refer parties to mediation without their consent under Section 89 of the Code of Civil Procedure, 1908, and Section 12A of the Commercial Courts Act, 2015 makes the attempt a condition of instituting certain suits. No court can refer parties to arbitration without an arbitration agreement, because the tribunal's authority is purely consensual. The compulsion in mediation is compulsion to attempt; the consent in arbitration is consent to be bound.

4. Choosing between Them

A binding determination is needed from a party who will not move voluntarily: arbitration is the only route.
The relationship is to continue, or the useful outcome is an arrangement for the future: mediation, which can produce terms no award could contain.
The amount is modest: mediation, or the fast track procedure under Section 29B if an award is required.
Third parties are involved: neither process binds a stranger, but a mediated settlement can include a willing third party as a signatory, which an award cannot.
Cross-border enforcement matters: arbitration, because an award travels under the New York Convention while a mediated settlement does not, India having signed but not ratified the Singapore Convention.

5. Related Topics and Provisions

Topic or provision	Connection
Arbitration and Conciliation Compared	The same comparison against the older process
Adjudicatory vs Non-Adjudicatory ADR	The classification on which the difference rests
Types of ADR Mechanisms	Mediation, arbitration and the hybrids in outline
Sections 18, 30, 31, 34 and 36, A&C Act, 1996	Fairness, settlement, the award, challenge and enforcement
Sections 3(h), 5, 18 to 28, Mediation Act, 2023	The mediation regime relied on here
Section 12A, Commercial Courts Act, 2015	Compulsory mediation before a commercial suit