Mediation bill will prevent protracted litigation, enable ease of doing business

One of the salient features of the bill is the introduction of a mediation council, which will not only promote mediation across the country, but also trains mediators.

The mediation bill, which was passed by the Rajya Sabha on August 1, will enable ease of doing business and ensure commercial disputes are resolved through mediated agreements that are on par with court orders, lawyers said.

On July 19, the union cabinet approved amendments to the Mediation bill, including halving the time for the completion of mediation proceedings from 360 to 180 days. The mediation bill was first introduced in the Rajya Sabha in 2021, after which it was referred to the parliamentary committee on law, which gave its report.

The first of its sort, the bill is likely to give a legal framework to a mode of dispute resolution that has largely been informal so far. Mediation is a type of ADR (alternative dispute resolution), where a dispute is referred to a neutral person, who engages with the warring parties and tries to find a solution agreeable to both. Courts have regularly been ordering mediation to settle civil, commercial, and family disputes, among others.

"The Mediation Bill embodies the spirit of agile business. By fostering a culture of dialogue and negotiation, it streamlines dispute resolution, reducing both time and cost,” said Sonam Chandwani, Managing Partner, KS Legal & Associates.

One of the salient features of the bill is the introduction of a mediation council, which will not only promote mediation across the country, but also trains mediators. This will ensure that mediators are able to handle complex commercial disputes arising out of business dealings.

Amir Bavani, founder of AB Legal, noted that the mediation council will aid in developing India as a robust centre for domestic as well as international mediation. He said, “the bill provides for the creation of mediation service providers, which shall oversee the infrastructure for the efficient conduct of mediation, thereby creating confidence in the business community.”

Time-bound dispute resolution

According to the bill, the entire process of mediation should be completed in 180 days, which is extendable by another 180 days. Compared to court litigation, which takes years to conclude, mediation gives businesses an easier and faster way to resolve their disputes.

“The Act provides for the mediation process to be time-bound, i.e., the entire process is to be concluded within 180 days, extendable by 180 days more subject to bona fide causes. It further requires minimal legal compliances and documentation, which substantially reduces complex data management, leading to cost savings for businesses,” said Ekta Rai, lawyer, Delhi High Court.

The bill also emphasises that the mediation proceedings should be confidential, thereby encouraging businesses to engage in mediation rather than expensive litigation.

Mediated settlement equal to a court order

Currently, mediations are ordered by the courts, and when a dispute is thus settled, the settlement agreement is converted into a decree by the court, thus making it binding on the parties. However, the Mediation bill puts a mediated settlement agreement on par with a court judgment, without the need for any further court sanction.

Tushar Agarwal, a lawyer at the Supreme Court, said, “Mediation agreements will be final, binding, and enforceable in the same manner as a court decree. They can only be challenged on grounds of: (i) fraud, (ii) corruption, (iii) impersonation, or (iv) relating to disputes not fit for mediation. Thus ensuring that mediation agreements are not easy to challenge.”

The courts have consistently adopted the practice of not encouraging appeals when parties consensually settle disputes. Thus, the Mediation bill also provides certainty to businesses, once a settlement is reached.

“Businesses can be confident that the agreements they reach through mediation will be enforceable. This will provide certainty for businesses and make it easier for them to plan their future activities,” said Abhinay Sharma, managing partner at law firm ASL Partners.

In the past, the courts have referred many important commercial as well as political disputes to mediation. In 2019, the Supreme Court appointed a panel of three mediators to settle the Ayodhya dispute, one of the biggest disputes in the history of the country.