The Mediation Act, 2023

The Mediation Act, 2023 is the first Indian statute devoted to mediation. Its long title states its objects: to promote and facilitate mediation, especially institutional mediation, to enforce mediated settlement agreements, to provide a body for the registration of mediators, to encourage community mediation and to make online mediation an acceptable and cost-effective process. It received the assent of the President on 14 September 2023. Its provisions have been brought into force in stages, so in any particular matter the date from which a given section operates should be verified.

The eleven chapters, the sections in each, and the Schedules

1. Application and Definitions

Section 2 states the application. The Act applies where the mediation is conducted in India and all or both parties habitually reside in, are incorporated in or have their place of business in India; or where the mediation agreement provides that any dispute shall be resolved in accordance with this Act; or where there is an international mediation. It also applies where one of the parties is the Central Government, a State Government or an entity controlled by them, in a commercial dispute, and in other disputes where such a party is involved and a notification is issued.

Two consequences flow from Section 3(h). The mediator's want of authority to impose is the defining feature of the process and separates it from every adjudicatory mechanism. And conciliation is brought within mediation, which is the change given effect by the Sixth Schedule in its substitution of Sections 61 to 81 of the Arbitration and Conciliation Act, 1996.

2. The Mediation Agreement and the Gateway Provisions

1. Section 4, the mediation agreement. It must be in writing, by or between the parties and anyone claiming through them, and may take the form of a clause in a contract or a separate agreement. The requirement of writing is satisfied by a document signed by the parties, an exchange of communications or letters including by electronic form, or an exchange of statements of claim and defence in which the existence of the agreement is alleged by one party and not denied by the other.
2. Section 5, pre-litigation mediation. Parties may, whether or not there is a mediation agreement, voluntarily and with mutual consent take steps to settle a civil or commercial dispute by pre-litigation mediation before filing a suit or proceeding. The word voluntarily is the mark of the change made during the passage of the Bill: as introduced, pre-litigation mediation was to be compulsory, and the Parliamentary Standing Committee recommended that it be made optional. Compulsion survives only under Section 12A of the Commercial Courts Act, 2015.
3. Section 6, disputes not fit for mediation. Mediation is not to be conducted for the disputes or matters specified in the First Schedule, though a court may refer any such matter to mediation relating to compoundable offences or matrimonial offences connected with or arising out of civil proceedings.
4. Section 7, reference by a court or tribunal. A court or tribunal may, at any stage of a proceeding and whether or not there is a mediation agreement, refer the parties to mediation, and may pass interim orders to protect the interests of a party.

3. The Mediator: Sections 8 to 12

Section 16 states the role of the mediator: he is to assist the parties in an independent, neutral and impartial manner in their attempt to reach an amicable settlement, and is to be guided by the principles of objectivity and fairness, protecting the voluntariness, confidentiality and self-determination of the parties. He is not to impose any settlement or give any assurance as to its outcome. Section 17 adds an important restriction: the mediator is not to act as an arbitrator, or as a representative or counsel of a party, in any arbitral or judicial proceeding in respect of the dispute, and is not to be presented as a witness in any such proceeding.

4. The Proceedings: Sections 13 to 26

The Council, the service providers, the Fund, and what the Act did to the conciliation regime

• Section 13, territorial jurisdiction. Mediation is to be undertaken within the territorial jurisdiction of the court or tribunal competent to decide the subject matter. Where the parties by mutual consent mediate outside that jurisdiction or online, the Explanation deems the mediation to have been undertaken within it for the purposes of enforcement, challenge and registration.
• Section 14, commencement. Where there is an existing mediation agreement, the proceedings commence on the date a party receives notice from the party initiating the mediation; in other cases, on the date of the appointment of the mediator or of consent to the reference, as the section provides.
• Section 15, conduct. The mediator may meet the parties together or separately, as often as he considers fit, for the orderly and timely conduct of the process, and may take such measures as he considers appropriate.
• Section 18, time-limit. The mediation is to be completed within 120 days from the date fixed for the first appearance before the mediator, extendable by a further 60 days with the consent of the parties.
• Section 21, non-settlement report. Where no settlement is reached, or the mediator finds that no settlement is possible, he prepares a non-settlement report in writing, without disclosing the cause of non-settlement or anything said in the proceedings.
• Section 24, termination. The mediation terminates on the signing and authentication of the settlement, on the non-settlement report, on a written declaration by the mediator after consultation that further efforts are not justified, or on a declaration by a party or the parties.
• Section 25, cost. The cost of the mediation, including the mediator's fee and the charges of the service provider, is borne equally unless otherwise agreed.
• Section 26. The proceedings of a Lok Adalat or a Permanent Lok Adalat under the Legal Services Authorities Act, 1987 are not affected by this Act.

5. The Settlement and Its Registration

Section 19 provides that where an agreement is reached, whether wholly or in part, it is to be reduced to writing, signed by the parties and authenticated by the mediator, and a copy furnished to the parties. Where the mediation was conducted by a mediator appointed by a court or tribunal, a copy is also to be forwarded to that court or tribunal. A settlement may be partial, in which case the unsettled part returns for adjudication.

Section 20 deals with registration. A mediated settlement agreement arrived at otherwise than in a court-referred or Lok Adalat mediation may be registered with an Authority constituted under the Legal Services Authorities Act, 1987, within 180 days of receiving the authenticated copy, and a unique registration number is issued. Registration is optional and is not a condition of enforceability; its value is evidentiary, in establishing the existence and terms of the settlement.

6. Confidentiality and Privilege

Section 22 requires the mediator, the parties, the mediation service provider and the participants to keep confidential all mediation communications, which include the statements and proposals made, the admissions, and the documents prepared solely for the mediation. No audio or video recording is to be made. Confidentiality does not extend to the settlement agreement where its disclosure is necessary for registration, enforcement or challenge.

Section 23 provides the privilege against disclosure. No mediation communication is admissible in any arbitral or judicial proceeding, and no party or participant may be compelled to disclose it. The exceptions are narrow: the settlement agreement itself, where required for registration, enforcement or challenge; a communication relating to a threat of bodily harm or the commission of an offence; and such disclosure as is required by law.

7. Enforcement, Challenge and Limitation

Section 29 supplies the limitation protection. In computing the period of limitation for any proceeding relating to a dispute in respect of which a mediation has been undertaken, the period from the commencement of the mediation under Section 14 up to the submission of the non-settlement report under Section 21 or the termination of the mediation under Section 24 is excluded. The effect is that an attempt to settle costs a litigant nothing in time, which is the practical condition of voluntary mediation being used at all.

8. Online and Community Mediation

• Section 30, online mediation. Mediation, including pre-litigation mediation, may be conducted online at any stage with the written consent of the parties, by the use of electronic form or computer networks, including encrypted electronic mail, secure chat rooms and audio or video conferencing, provided the confidentiality and integrity of the proceedings are maintained.
• Section 43, community mediation. Any dispute likely to affect the peace, harmony and tranquillity among the residents or families of an area or locality may be settled through community mediation with the prior mutual consent of the parties. A party applies to the Authority under the Legal Services Authorities Act, 1987, or to the District Magistrate or Sub-Divisional Magistrate where no such Authority exists, which constitutes a panel of three mediators.
• Section 44, procedure. The community mediation is to be conducted in the manner specified, and a settlement so arrived at is to be reduced to writing and signed, but is not enforceable as a judgment or decree. This is the single most important qualification on community mediation and should always be stated.

9. The Institutional Framework

10. Effect on Other Laws, and the Transition

The Act amends a number of other enactments through its Schedules. The most important is the Sixth Schedule, which substitutes Sections 61 to 81 of the Arbitration and Conciliation Act, 1996 with a new Section 61, under which a provision in any other enactment providing for conciliation in accordance with that Act is to be construed as a reference to mediation under the Mediation Act, 2023, and conciliation under the 1996 Act and under the Code of Civil Procedure, 1908 is to be construed as mediation within Section 3(h). The new Section 62 provides that a conciliation proceeding initiated under the old provisions continues as such, as if the Mediation Act had not been enacted. Other Schedules make consequential amendments to enactments including the Indian Contract Act, 1872, the Code of Civil Procedure, 1908, the Legal Services Authorities Act, 1987, the Micro, Small and Medium Enterprises Development Act, 2006, the Companies Act, 2013, the Commercial Courts Act, 2015 and the Consumer Protection Act, 2019.

11. Assessment

The Act supplies what Indian mediation lacked: a statutory basis for the process, a time limit, protection for what is said, protection of limitation, an enforceable outcome and a regulator. Three criticisms are commonly made and should be stated. Pre-litigation mediation was made voluntary, so the Act relies on Section 12A of the Commercial Courts Act, 2015 for the only real compulsion. The regulatory apparatus of registration and grading is thought by some to over-regulate a process whose value lies in its informality, and the Council remained unconstituted for nearly three years after the Act was passed. And the gap in cross-border enforcement remains, since India has signed but not ratified the Singapore Convention, so a settlement reached abroad does not carry the benefit of Section 27 here and one reached here does not travel.

12. Related Topics and Provisions