The concept of Mediation has been in practise in the Indian civilization since
ancient times. During the classical times, a third neutral person was always
asked to help solve the dispute. This form of dispute resolution was widely
accepted by the people and it portrayed features of both mediation and
arbitration as the neutral person helped resolved the dispute and also gave a
decision to it.
Section 89 of the Code of Civil Procedure was amended whereby mediation and
judicial settlement were envisaged as modes of settlement of disputes. The
amendment was implemented on the recommendation given by the Law Commission of
India and the Malimath Committee. Section 89 now makes it mandatory for the
court after framing issues to refer the dispute for other alternate dispute
resolution systems in the form of mediation, arbitration, conciliation, or
judicial settlement. If the alternate forum is not successful in resolving the
disputes, only then the matter can be referred back to the court to proceed with
It is maybe perhaps the best setback of our times, that, in spite of its
momentous pace of settlement in the new past, the vast majority of lawyers view
mediation with a focal point of doubt. The has been a lack of awareness among
the common people with regard to the time and cost-efficient dispute resolution
mechanism which it offers. And this is attributable to those minority of
litigants, who use mediation as a deferring strategy, attempting to destroy the
other side by prolonging mediation without even attempting meaningful
resolution, and consequently postponing adjudication of claims.
The Commercial Courts Act: Scope and Objectives
The Commercial Courts Act was introduced in 2015 to determine commercial courts
in India for adjudication of Commercial Disputes
. The statute sets out a
smoothed-out technique for quick resolution of high-stake disputes of a
commercial nature with strict timelines for filing of pleadings, discovery and
procedure for grant of summary judgments. The definition of Commercial
Disputes under the Act is broad and usually covers commercial transactions and
includes disputes arising out of property rights.
In 2018, the Act was amended
to usher in some clarity of procedure and also to introduce the mandatory
pre-institution mediation provision. As per the amendments in 2018, any
Commercial Dispute valued at more than INR 3,00,000 is governed by the
provisions of the Act.
Pre-Institution Mediation- Overview
Section 12A of the Commercial Courts Act assists the parties to resolve their
disputes with an alternative method amicably by way of negotiation or mediation
It provides that the party initiating a suit must go through mandatory mediation
proceeding with an exception to proceed with the ancient litigation in case of
urgent interim relief. However, the only short coming to this provision is a
timeline for completing such mediation proceeding, as in numerous cases such
proceedings can go for months which will result in the same setback which
litigation has, but the Commercial Courts Act bridges this gap by making
mediation a time-bound process.
However, according to sub-section (1) of Section 12A, the mandatory reference to
mediation can be prevented if, there has been a simultaneous application of
‘urgent interim relief’, in which eventuality, the reference to mediation can be
avoided and the suit may be instituted.
The consequence of such provision has led to ignorance to the alternate method,
as even though the suit does not constitute any urgent relief, an application
for the same is filed along with the plaint which distrust in mediation.
By the interpretation of Section 12A, it can be deduced that, such provision not
only provides for interim relief, but also ‘urgent’ interim relief. The
expression ‘interim relief’ has been qualified. It is a legally accepted
principle that where the contents of a statute are unambiguous, the literal rule
of construction shall apply as that alone can truly represent the will of the
legislature. Lord Granworth in Grundy v. Pinniger
, very succinctly
articulated that …to adhere as closely as possible to the literal meaning of the
words used, is a cardinal rule from which if we depart, we launch into a sea of
difficulties which it is not easy to fathom.
Sub-section 3 of Section 12 provides for a timeline for completion of mediation
proceedings i.e., it has to be completed within a period of three months, which
can be extended for two months if the parties consent, provided the timeline is
to be calculated from the date of application of the suit. It is further
provided that time spent in pre-institution mediation shall not be computed for
the purpose of limitation under the Limitation Act, 1963. If the parties to the
commercial dispute reach a settlement, an equivalent shall be reduced into
writing and shall be signed by the parties to the dispute and therefore the
In case the parties reach to an amicable solution, then it would have the same
effect and status as an arbitral award sub-section (4) of Section 30 of the
Arbitration and Conciliation Act, 1996.
- The first form comes when it is preserved when the suit is not filed in
court because if filed, it becomes a matter of public record.
- The second form comes during the process of mediation as the most
important feature of such alternate method is its confidentiality.
When a dispute is being heard in pre-litigation mediation, then it has not been
filed with the courts, which means that the information of the lawsuit and
parties are not made public. One of the major objectives of such commercial
matters to be referred to the pre-mediation litigation are to preserve the
reputation and goodwill of the parties they hold to avoid unnecessary scrutiny.
In case of the matter being heard in the classical forum of litigation, where
all the phases of a trial and evidence presented to be available to the public,
privacy may be a strong incentive for disputing parties to enter the mediation
process early during a legal dispute.
Confidentiality is one among the best benefits of mediation, and this benefit is
intensified through the utilization of pre-litigation mediation. A harmonious
settlement can only be reached if the parties are comfortable in revealing all
the sensitive information to the mediator without any fear of such information
being leaked. Confidentiality in mediation is vital to assist the parties to
candidly and thoroughly discuss all possible outcomes of settlement. The
knowledge that an off-the-cuff, honest, and confidential discussion can happen
with the mediator adds to the speed and success of mediation.
The Supreme Court of California reaffirmed the confidentiality of all mediation
communications when it ruled on Foxgate Homeowners’ Association v. Bramalea
California, Inc. This decision upheld sweeping protection for the
confidentiality of mediation. In doing so, however, the court recognized that a
mediator’s independent role "is also of paramount importance and will not be
Key Highlights of the Rules are as follows: Initiation of mediation process
- A party to a commercial dispute needs to make an application to the
Authority and the Administration shall, having regard to territorial and
pecuniary jurisdiction and nature of commercial dispute, issue notice, to
the opposite party to appear and give consent for the participation in the
pre-mediation process within ten days from the issue of such notice.
- In case no reply is obtained by the opposite party then the Authority
shall issue final notice as specified above.
- Where opposite party, after receiving the notice seeks for an extension
to appear for such mediation proceedings, the authority may fix an alternate
date which shall not be later than 10 days from the date of such request
- Where opposite party fails to appear on fixed date fixed, the Authority
shall treat the mediation process to be a non-starter and make report
endorse the same to both the parties.
- Where both parties appear and give consent to participate in the
mediation process, the Administration shall designate the commercial dispute
to a Mediator and fix a date for appearance before the said Mediator.
- The Authority shall make sure that the mediation process is completed
within 3 months from receipt of application for pre-institution mediation
with an extension for a period of two months only on the consent of both the
Procedure for Initiating Pre-Institution Mediation
The following procedure has to be followed while conducting mediation:
- Right after the commencement of mediation, the Mediator shall briefly
explain the procedure of mediation to the parties. The date and time of each
mediation sitting should be fixed by Mediator after consultation with the
- The Mediator may during the course of mediation hold meeting with the
parties separately or jointly to have a better understanding of the issues;
- The applicant or the opposite party may put forth their settlement
proposals to the Mediator in private caucus with the clear instruction as to
which part of the proposal are to be disclosed to the other party.
- Parties can also exchange settlement proposals with each other during
mediation sitting either orally or in writing;
- During the mediation process, it is the duty of the Mediator to maintain
confidentiality of discussions made in private caucus with each party and
only the facts which a party permits can be disclosed with other party;
- Once both parties reach to a harmonious settlement, same shall be
reduced in writing by Mediator and signed by the parties and;
- Mediator shall provide the settlement agreement, in original, to all the
parties and also forward a signed copy to the Authority; and
- Where no settlement is arrived between the parties within time as
specified in sub-section (3) of Section 12A of the Act or where Mediator is
of the opinion that the settlement isn't possible, the Mediator must submit
a report back to the Authority, with recorded reasons in writing.
The Authority/Mediator, shall not retain the hard/soft copies of documents
exchanged between parties or submitted to Mediator or any notes prepared by the
Mediator beyond 6 months other than application for mediation, notice issued,
settlement agreement and failure report.
Parties to act in good faith: All the parties to a billboard dispute should
participate within the mediation process in straightness with intention to
settle the dispute.
Confidentiality of mediation: The Mediator, parties or their authorized
representatives/Counsel shall maintain confidentiality about the mediation and,
the Mediator shall not allow stenographic/audio/video recording of the mediation
Instituting pre-initiation mediation holds many advantages over classical form
- Cost and time-effective
The timeline which the Commercial Courts Act
provides for Pre-litigation mediation of a period of three months from the date
of application made by the plaintiff, with an extension of two months on the
consent of both the parties, help resolve the commercial dispute in a time bound
manner. Such time bound process not only saves time of the parties but also the
costs which is incurred by the parties involved in long term litigation
Confidentiality being one of the most important features
of mediation help the parties maintain their reputation and goodwill. A
harmonious settlement can only be reached if the parties are comfortable in
revealing all the sensitive information to the mediator without any fear of such
information being leaked. The Rules provides confidentiality by providing that
the mediator, the parties, and their counsels must maintain confidentiality
about the mediation.
Negotiating in good faith Negotiations between parties can one go on for
months. During this time, any may at time engage in infringing acts. The fear of
possible litigation that could result due to an unsuccessful mediation under the
Commercial Courts Act would possibly motivate parties to negotiate the terms in
The only setback to Section 12A is that it provides for an exception to the
mandatory pre-litigation mediation in cases of interim relief application,
therefore in cases the opposing party opts for such an exception which will
result in the mediation proceedings being deemed a non-starter. This optional
approach arguably results in the provision lacking teeth.
The Way Forward
The new approach is to keep an internal dispute from getting to a point where a
suit even needs to be filed -- to resolve a problem at its earliest stage. With
the assistance of a professional mediator to review all the factual technical
information provided with the parties should, always help them to reach to a
harmonious solution which sometimes creates a win-win situation for both.
Mediation, especially pre-litigation mediation, is uniformly recognized because
it is the best opportunity to resolve a dispute. With reference to privacy
within mediation, the protection of confidentiality is of utmost concern.
Therefore, as Joseph Grynbaum, a distinguished mediator, said:
An ounce of
mediation is equal to a pound of arbitration and a ton of litigation
, it is an
undeniable fact that mediation as one of the forums of alternate dispute
resolution mechanism offers numerous special features over the ancient
litigation forum in ways of time bound process, confidentiality of the process
and cost effectiveness.
Therefore, despite the legislative shortcomings,
mediation has become increasingly relevant in these unprecedented times of
commercial turmoil as corporates navigate through contractual disputes while
attempting to avoid a financial crisis.
- The Commercial Courts Act, 2015, Section 2(1)(i), No. 4, Acts of
Parliament, 1949 (India)
- The Commercial Courts Act, 2015, Section 12(A), No. 4, Acts of
Parliament, 1949 (India)
- Aparna Gaur & Aarushi Jain, Pre-Institution Mediation Under the Indian
Commercial Courts Act: A Strategic Advantage, Nitish Desai
- Grundy v. Pinniger (1852) 1 LJ Ch 405.
- Foxgate Homeowners’ Association v. Bramalea California, Inc (2001) 26