MANDATORY COMMERCIAL MEDIATION AND ITS IMPACT ON THE COURTS OF LAW
– JLN Murthy
“When Mediation is mastered, the mind is unwavering like the flame of a lamp in a windless place”
– The Bhagavad Gita
INTRODUCTION TO MEDIATION
The present-day thesis on the need to evolve Alternative Dispute Resolution mechanisms tends to focus upon the large, and almost unmanageable, docket of litigation before Courts. The basis that is enunciated in the advocacy of ADR is the inability of Courts to handle the existing file of cases. Mitigating the burden of arrears is undoubtedly one of the important objectives. Mediation as a processual intervention in the legal system fulfils other instrumental and intrinsic functions which are of an equal, if not greater importance. In its instrumental function, mediation is a means to fulfilling stated objectives.
The intrinsic function of mediation emphasizes the value of mediation as an end in itself. Talking about mediation, it is a decision-making process in which the parties are assisted by a third party, the mediator, the mediator attempts to improve the process of decision making and to assist the parties reach an outcome to which each of them can assent. In other words, the parties in dispute have the authority over the merits of the case and the decision to go to mediation may be taken at any time from the moment a dispute arises until the moment before a judge hands down a ruling.
To elaborate, Mediation is therefore, the name given to a series of procedures that can be adopted to resolve disputes without recourse to courts. The group of procedures typically known as mediation allows the parties to disputes to resolve them and remain in an equitable relationship. As mentioned by Peter D. Ambrumenil, mediation is effectively a “without prejudice” process, whereby the parties to a dispute are assisted by a neutral third party to resolve the dispute on terms of which hopefully all will find acceptable. It has various benefits owing to its structured, voluntary and interactive negotiation process wherein the main emphasis is laid down on the interests, needs and rights of the parties.
Mediation may be divided into two commonly followed subcategories, court referred mediation wherein a court may refer a pending case for mediation under section 89 of the code of civil procedure, 1908 or private mediation where in qualified personnel hired by the parties involved in the dispute acts as a mediator. The former category of mediation is mainly seen in resolution of cases involving matrimonial disputes, typically divorce cases.
HISTORICAL PERSPECTIVE OF MEDIATION
Mediation isn’t something that was introduced recently in India. Indian mythology mentions similar steps of resolving the dispute during the times of Mahabharata and Ramayana where Lord Krishna and Lord Hanuman respectively tried to mediate on behalf of the affected party.
As recorded in Mulla’s Hindu Law, ancient India began its search for laws since Vedic times approximately 4000 to 1000 years B.C. and its imaginable that some of the Vedic hymns were composed earlier than 4000 B.C. period. The early Aryans were very potent, intense and unsophisticated people full of joy for life and had behind them ages of civilised existence and thought. They primarily invoked the unwritten law of divine wisdom, reason and prudence, which according to them governed heaven and earth. This was one of the first originating philosophies of mediation – Wisdom, Reason and Prudence, which originating philosophy is even now practiced in western countries.
This matter entailed many of the collaborative dispute resolution methods adopted in the modern mediation process. Towards the end of the Vedic epoch, philosophical and legal debates were carried on for the purpose of eliciting truth, in assemblies and parishads, which are now described as conferences. The era of Dharma Shashtras[code of conduct]
followed the Vedic epoch, during which period scholastic jurists developed the philosophy of basic laws.
Their learned discourses recognised existing usages and customs of different communities, which included resolution of disputes by non-adversarial indigenous methods. One example is the tribunal propounded and set up by a brilliant scholar Yagnavalkya, known as KULA, which dealt with the disputes between members of the family, community, tribes, castes or races. Another tribunal known as SHRENI, a corporation of artisans following the same business, also dealt with their internal disputes. PUGA was an identical group of traders in any branch of commerce. Another scholar Parashar surmised that certain questions should be resolved by the decisions of a parishad or association or an assembly of the learned. These associations were invested with the power to decide cases based on principles of justice, equity and good conscience. The parishad recognised the modern concept of participatory methods of dispute resolution with a strong element of voluntariness, which another founding principle of modern mediation.
Mediation advanced with the rise of Buddhism as Buddha said “better than a thousand hollow words is one word that gives peace”. Buddhism set forth mediation as the wisest method of resolving problems. Buddha said, “Meditation brings wisdom; lack of mediation leaves ignorance. Know well what leads you forward and what holds you back; choose that which leads to wisdom”. This Buddhist aphorism echos acceptance of the principle that mediation focuses on the future instead of dwelling in the past.
Ancient Indian Jurist Patanjali said, “Progress comes swiftly in mediation for those who try hardest, instead of deciding who was right and who was wrong”. It is a known fact that problematic cases were resolved not in the King’s courts but by King’s mediator.
Even during the Mughal rule, Emperor Akbar turned to his mediator minister Birbal in times of complicated situations. The most famous case was when two women claimed motherhood of a child, the Mediator suggested cutting the child into two and dividing its body and giving one-half to each woman. The real mother gave up her claim to save the child’s life whereas the fake mother agreed to the division. The child was then handed to the real mother. Though this was not a fully-developed example of modern mediation, it is an example of interest-based negotiation where the neutral third party seeks to identify the underlying needs and concerns of the parties.
As societies grew in size and complexity, informal decision-making processes became more structured and systematic and they gradually took the shape of a formal justice delivery system. In fact, societies could not grow larger in size and complexity without first evolving a system of resolving disputes that could keep the peace and harmony in the society and keep trade and commerce growing efficiently.
JOURNEY OF MEDIATION THROUGH THE YEARS
The different types of mediation and arbitration gained an immense fame amongst businessmen during pre-British Rule in India. The Mahajans were respected, impartial and prudent businessmen who used to resolve the disputes between merchants through mediation. They were promptly available at business centres to mediate the disputes between the members of a business association. The rule in the constitution of the Association made a provision to dismember a merchant in the event that he resorted to court before alluding the case to mediation. This was a unifying business sanction. This informal procedure in vogue in Gujarat, was a combination of Mediation and Arbitration, now known in the western world, as Medarb. This sort of mediation had no legal sanction in spite of its wide common popularity in the business world.
The East India Company from England gained control over the divided Indian Rulers and developed its apparent commercial motives into political aggression. By 1753 India was converted into a British Colony and the British style courts were established in India by 1775. The British ignored local indigenous adjudication procedures and modelled the process in the courts on that of British law courts of the period. However, there was a conflict between British values, which required a clear-cut decision, and Indian values, which encouraged the parties to work out their differences through some form of compromise.
The British system of justice gradually became the primary justice delivery system in India during the British regime of about 250 years. The British Courts gradually came to be recognised for its integrity and gained peoples’ confidence. Even after India’s independence in 1947, the Indian Judiciary has been proclaimed world over as the pride of the nation.
The concept of mediation received legislative recognition in India for the first time in the Industrial Disputes Act, 1947. The conciliators appointed under Section 4 of the Act are “charged with the duty of mediating in and promoting the settlement of Industrial disputes.”
Arbitration, as a dispute resolution process was recognised as early as 1879 and also found a place in the Civil Procedure Code of 1908. When the Arbitration Act was enacted in 1940 the provision for arbitration originally contained in Section 89 of the Civil Procedure Code was repealed.
The Indian parliament enacted the Arbitration and Conciliation Act in 1996, making elaborate provisions for conciliation of disputes arising out of legal relationship, whether contractual or not, and to all proceedings relating thereto. The Act provided for the commencement of conciliation proceedings, appointment of conciliators and assistance of suitable institution for the purpose of recommending the names of the conciliators or even appointment of the conciliators by such institution, submission of statements to the conciliator and the role of conciliator in assisting the parties in negotiating settlement of disputes between the parties.
In 1999, the Indian Parliament passed the CPC Amendment Act of 1999 inserting Sec.89 in the Code of Civil Procedure 1908, providing for reference of cases pending in the Courts to ADR which included mediation. The Amendment was brought into force with effect from 1st July, 2002.
Since the inception of the economic liberalisation policies in India and the acceptance of law reforms the world over, the legal opinion leaders have concluded that mediation should be a critical part of the solution to the profound problem of arrears of cases in the civil courts. In 1995-96 the Supreme Court of India under the leadership of the then Chief Justice, Mr. A. M. Ahmadi, undertook an Indo-U.S. joint study for finding solutions to the problem of delays in the Indian Civil Justice System and every High Court was asked to appoint a study team which worked with the delegates of The Institute for Study and Development of Legal Systems [ISDLS], a San Francisco based institution. After gathering information from every State, a central study team analysed the information gathered and made some further concrete suggestions and presented a proposal for introducing amendments relating to case management to the Civil Procedure Code with special reference to the Indian scenario.
After the enactment of the Arbitration & Conciliation Act, 1996, even though conciliation was given statutory recognition for the first time in India, the awareness of such an option was very limited to lawyers and litigants. The term “conciliation” even though considered synonymous and used interchangeably with “mediation” in most countries, was given a slight difference in the statute. The concept of mediation and conciliation was made familiar or given official court recognition only in 1996 and by the amendment of the Civil Procedure Code (CPC) in1999 by inserting Section 89.
The statutory language of the Arbitration and Conciliation Act, 1996 and of Section 89 of the Civil Procedure Code, demonstrates clearly the existence of differing definitions and meanings for “conciliation” and “mediation”. Generally, both mediation and conciliation are the assistance of disputants by an impartial third party in resolving disputes by mutual agreement.
In the landmark decision of Afcons Infrastructure Supreme Court examined the scope of Section 89 in detail and helped in eliminating ambiguities by providing the much-needed clarity on the process required to be followed by the courts in referring the disputes to ADR under the modes prescribed in section 89. Applying a purposive construction, this decision also corrected an important draftsman’s error by interchanging the definition of “judicial settlement” and “mediation” in Sections 89(2)(c) and (d).
In Para 12 of the Afcons decision a reference is drawn to Black’s Law Dictionary to say that ‘it is (mediation) also a synonym of the term conciliation’.
EVOLUTION OF MEDIATION IN INDIA
The first elaborate training for mediators was conducted in Ahmedabad in the year 2000 by American trainers sent by Institute for the Study and Development of Legal Systems (ISDLS). It was followed by a few repeated advance training workshops conducted by Institute for Arbitration Mediation Legal Education and Development (AMLEAD) a Public Charitable Trust settled by two senior lawyers of Ahmedabad. On 27th July 2002, the Chief Justice of India, formally inaugurated the Ahmedabad Mediation Centre, reportedly the first lawyer- managed mediation centre in India.
The Chief Justice of India called a meeting of the Chief Justices of all the High Courts of the Indian States in November, 2002 at New Delhi to impress upon them the importance of mediation and the need to implement Sec. 89 of Civil Procedure Code. Institute for Arbitration Mediation Legal Education and Development (AMLEAD) and the Gujarat Law Society introduced, in January 2003, a thirty-two hours Certificate Course for “Intensive training in Theory and Practice of Mediation”.
The U.S. Educational Foundation in India (USEFI) organised training workshops at Jodhpur, Hyderabad and Bombay in June 2003. The Chennai Mediation Centre was inaugurated on 9th April, 2005 and it started functioning in the premises of the Madras High Court. This became the first Court- Annexed Mediation Centre in India. The Delhi Judicial Academy organised a series of mediation training workshops and opened a mediation Centre in the Academy’s campus appointing its Deputy Director as the mediator. Delhi High Court Mediation and Conciliation Centre has been regularly organising mediation awareness workshops and Advanced Mediation Training workshops.
The Mediation and Conciliation Project Committee (MCPC) was constituted by the then Chief Justice of India Hon’ble Mr. Justice R.C. Lahoti by order dt. 9th April, 2005. Hon’ble Mr. Justice N. Santosh Hegde was its first Chairman. It consisted of other judges of the Supreme Court and High Court, Senior Advocates and Member Secretary of NALSA. The Committee in its meeting held on 11th July, 2005 decided to initiate a pilot project of judicial mediation in Tis Hazari Courts. The success of it led to the setting up of a mediation centre at Karkardooma in 2006, and another in Rohini in 2009. Four regional Conferences were held by the MCPC in 2008 at Bangalore, Ranchi, Indore and Chandigarh.
MCPC has been taking the lead in evolving policy matters relating to the mediation. The committee has decided that 40 hours training and 10 actual mediation was essential for a mediator. The committee was sanctioned a grant-in-aid by the department of Legal Affairs for undertaking mediation training programme, referral judges training programme, awareness programme and training of trainers programme. With the above grant-in-aid, the committee has conducted till March, 2010, 52 awareness programmes/ referral judges training programmes and 52
Mediation training programmes in various parts of country. About 869 persons have undergone 40 hours training. The committee is in the process of finalising a National Mediation Programme. Efforts are also made to institutionalise its functions and to convert it as the apex body of all the training programmes in the country.
The Supreme Court of India upheld the constitutional validity of the new law reforms in the case filed by Salem Bar Association and appointed a committee chaired by Justice Mr. Jagannadha Rao, the chairman of the Law Commission of India, to suggest and frame rules for ironing out the creases, if any, in the new law and for implementation of mediation procedures in civil courts. The Law Commission prepared consultation papers on Mediation and Case Management and framed and circulated model Rules.
The Supreme Court approved the model rules and directed every High Court to frame them. The Law Commission of India organized an International conference on Case Management, Conciliation and Mediation at New Delhi on 3rd and 4th May 2003, which was a great success. Delhi District Courts invited ISDLS to train their Judges as mediators and help in establishing court annexed mediation centre. Delhi High Court started its own lawyers managed mediation and conciliation centre.
Karnataka High Court also started a court-annexed mediation and conciliation centre and trained their mediators with the help of ISDLS. Now court-annexed mediation centres have been started in trial courts at Allahabad, Lucknow, Chandigarh, Ahmedabad, Rajkot, Jamnagar, Surat and many more Districts in India.
Disputes are inevitable in commercial transactions. It has frequently been experienced that the parties to a commercial dispute, including international commercial transaction disputes, take a recourse to arbitration. Institutions like ICADR, I.C.C, L.C.I.A and I.C.S.I.D have evolved and are handling the matters relating to commercial disputes. Mediation is one of the methods involved in the dispute resolution cases and has proven itself to be unique and quite successful settlement process when conducted by a skilled mediator.
Contracts govern the commercial relationships and an efficient enforcement of contract is essential to economic development and sustained growth. India is not untouched by the developments involved in the field of law and business and accordingly is concerned about various indices including the one on ‘Ease of Doing Business’. Selection of a proper dispute resolution clause in commercial arrangements is an important risk management strategy.
The developments with respect to speedy dispute resolution in India provide an impetus to the same. in the enactment of the commercial courts, commercial division and commercial appellate division of high courts act, 2015 wherein in the act provides for the constitution of commercial courts, commercial division and commercial appellate division in the high courts for adjudicating commercial disputes of specified value and the matters connected therewith or incidental thereto. Section 2(1)(c) of the act states the following as the categories of commercial disputes covered by the act:
Ordinary transactions of merchants, bankers, financiers and traders such as those relating to (i) mercantile documents, including enforcement and interpretation of such documents; (ii) export or import of merchandise or services; (iii) issues relating to admiralty and maritime law; (iv) transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same; (v) carriage of goods; (vi) construction and infrastructure contracts, including tenders; (vii) agreements relating to immovable property used exclusively in trade or commerce; (viii) franchising agreements; (ix) distribution and licensing agreements; (x) management and consultancy agreements; (xi) joint venture agreements; (xii) shareholders agreements; i) subscription and investment agreements pertaining to the services industry including outsourcing services and financial services; (xiv) mercantile agency and mercantile usage; (xv) partnership agreements; (xvi) technology development agreements; (xvii) intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits; (xviii) agreements for sale of goods or provision of services; (xix) exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum; (xx) insurance and re-insurance; (xxi) contracts of agency relating to any of the above; and (xxii) such other commercial disputes as may be notified by the Central Government.
It is also mentioned in the act that a commercial dispute shall not cease to be a commercial dispute merely because- (a) it also involves action for recovery of immovable property or for realisation of monies out of immovable property given as security or involves any other relief pertaining to immovable property; (b) one of the contracting parties is the State or any of its agencies or instrumentalities, or a private body carrying out public functions.
APPLICATION OF MEDIATION IN COMMERCIAL DISPUTES
Based on various facts relating to the process of mediation, how in most cases people voluntarily opt for mediation to mutually resolve their legal issues and how the process of mediation encourages parties to participate in the dispute resolution process actively and directly, it can be concluded that it is a popularly opted method of alternative dispute resolution. The privity and the confidentiality of the process are also a couple of examples for the same to be more specific, in case of commercial matters, issues have monetary and financial impacts. In all cases, parties express their fears, their expectations and their dearly held positions on the strength of the confidence that they repose in the mediator and the mediation process-both of which are reinforced by the absolute cloak of confidentiality.
It is also mentioned in the preamble of UN convention on international settlement agreement resulting from mediation that the use of mediation results in significant benefits such as reducing the instances where a dispute leads to the termination of a commercial relationship, facilities the administration of international transactions by commercial parties and produces savings in the administration of justice by states.
Recognising the value of mediation as a method of amicably settling disputes arising in the context of international commercial relations, the UN general assembly was convinced that the adoption of a convention on the international settlement agreement resulting is acceptable to states with different legal, social and economic systems and would compliment the existing legal frame work on international mediation and contribute to the development on luminous international economic relations
The brothers’ protracted mediation began after a Bombay high court hearing on 14 November 2014 at which senior counsel Iqbal Chagla and law firm Federal Rashmikant represented Cyril, and senior counsel P Chidambaram and law firm Bharucha & Partners acting for Shardul. After that hearing the brothers agreed to mediate their differences under the three mediators, rather than fight it out in the courtroom. This was termed as the biggest law firm split, not only in India but everywhere.
Another reason why mediation is effective and is preferred in commercial disputes is due to the difference it holds when compared to institutional arbitration.
Mediation is a little different from arbitration in certain matters Insofar as reference of dispute to arbitration is concerned, it has been interpreted by this Court that resort to arbitration in a pending suit by the orders of the court would be only when parties agree for settlement of their dispute through arbitration, in contradistinction to the Alternate Dispute Resolution mechanism (for short “ADR”) through the process of mediation where the Judge has the discretion to send the parties for mediation, without even obtaining the consent of the parties.
To quote a case law with respect to mediation in commercial disputes, in the case of Laxmi Snacks Pvt. Ltd. v. Akshar Food Products, the Appellant approached this Court aggrieved by the Order dated 24th November, 2015 passed by the High Court of Gujarat at Ahmedabad. The issue in this case essentially pertains to some disputes with regard to the use of labels, trade dresses and getup of certain products which fall under the definition of ‘commercial dispute under the commercial courts, commercial division and commercial appellate act, 2015 under the Section 2(1)(c).
When the matter was heard by this Court on 4th January, 2016, on a suggestion by Court to both sides, they willingly went for mediation before the Supreme Court, Mediation Centre. the parties amicably settled all their disputes with the help of mediation as a method of dispute resolution. The terms of understanding involved in the dispute had been reduced to a Settlement Agreement dated 28th January, 2016 and signed by all the parties, their counsel and also learned Mediator-Dr. Aman Hingorani.
Warren Burger, once said,
The obligation of the legal profession is… to serve as healers of human conflict… (we) should provide mechanisms that can produce an acceptable result in shortest possible time, with the least possible expense and with a minimum of stress on the participants. That is what justice is all about.
MEDIATION is one such mechanism which has been statutorily brought into place in our Justice System. It is one of the methods of Alternative Dispute Resolution and resolves the dispute in a way that is private, fast and economical. It is a process in which a neutral intervener assists two or more negotiating parties to identify matters of concern, develop a better understanding of their situation, and based upon that improved understanding, develop mutually acceptable proposals to resolve those concerns. It embraces the philosophy of democratic decision-making.
One of the aims of mediation, as a consequence is to find an early resolution of the dispute. The sooner dispute is resolved the better for all the parties concerned, in particular, and the society, in general. For parties, dispute not only strains the relationship but also destroy it. So, what is required is resolution of dispute at the earliest possible opportunity and via such a mechanism where the relationship between individual goes on in a healthy manner.
Although a step in the right direction, there is no denying that the implementation and success of the envisaged mechanism remain highly questionable. Perhaps the biggest hindrance could prove to be the authorisation of the State Authorities and District Authorities (constituted under the Legal Services Authorities Act, 1987) as the relevant authorities to conduct the pre-institution mediation.
The object of the Legal Services Authorities Act is to “provide free and competent legal services to the weaker sections of the society to ensure that opportunities for securing justice are not denied to any citizen by reason of economic or other disabilities”. To this end, State Authorities and District Authorities (“LSA Authorities”) provide legal services to eligible persons and periodically conduct Lok Adalats (“people’s courts”), among other functions and services.
While an analysis of the Legal Services Authorities Act is beyond the scope of this article, it suffices to state that the LSA Authorities are already immensely overburdened. This problem only amplifies when one considers:
(1) the fact that the Bill lowers the required pecuniary threshold of a suit from one crore Indian rupees to three lakh Indian rupees;
(2) the broad definition of “commercial dispute” under section 2(1)(c) of the Act. While a lower pecuniary threshold is an arguably well-intentioned amendment to allow more people to access commercial courts and facilitate resolution of more commercial disputes, it is likely to adversely impact the pre-institution mediation. A broad definition of “commercial dispute” combined with a lower pecuniary threshold is more likely than not to result in more suits filed under the Act, which in turn means more pre-institution mediations – the LSA Authorities are simply not equipped with the appropriate capacity currently to effectively deal with this, especially without compromising on the justice administered to the weaker sections of society, which is of course an undesirable outcome.
Moreover, it is likely that the LSA Authorities lack adequate and relevant experience and expertise to mediate commercial disputes as the disputes they typically address pertain to labour, family and insurance matters. Experience and training in commercial mediation is always preferable as the issues involved can be fairly technical and a skilled mediator in this regard can ensure effective dialogue and a workable settlement. Even if one were to legitimately reason that facilitative mediation does not necessarily require a mediator to be trained in the area of dispute, there is no guarantee that the officers and members of the LSA Authorities have any experience at all in any sort of facilitative mediation, let alone any training.
Efficient, useful and effective mediation of commercial disputes requires, at the very least, some basic minimum training in and exposure to mediation. This is all the more essential in a country like India where awareness of mediation is minimal and, therefore, parties rely on the mediator to effectively guide the process. In this respect, the Bill reflects a widely-held perception in India that anyone can mediate and that mediation is not a distinct discipline which requires its own skills-set.
Ideally, the successful implementation of any reform, such as pre-institution mediation in this case, requires adequate infrastructure and resources to be established and available prior to its introduction. India’s mediation machinery is minimal – there is no pool of certified accredited mediators, no central statute governing mediation and opportunities to be trained are limited.
Further, section 12A creates a carve-out from mandatory mediation for “urgent interim relief” – neither the Act nor the Bill clarifies what constitutes an “urgent” interim relief. This could potentially be misused by parties and/or counsel to wriggle out of participating in mediation or delaying the same, which in turn would defeat the overall objective of the statute. In addition, it is not clear if pursuit of the urgent interim relief temporarily delays the mediation or eliminates the mandatory requirement to mediate altogether.
Commercial courts were established as per the recommendations of law commission in 2003 as well as in 2015 to resolve disputes of high value which helps in disposing of cases in a timly manner and helps in combating the high pendency of cases that act as a parasite towards the time of the court. It is significant to note that such an adjudication of high value commercial disputes requires specialised expertise, and has a larger impact on foreign investments and economic growth of the country.
Reducing the minimum value to above rupees three lakh will increase the number of cases admitted in commercial courts and therefore slow down the priority given to relatively higher value cases. Note that while examining the 2015 Act, the Standing Committee on Law and Justice (2015) recommended increasing the minimum value of commercial disputes from one crore rupees to two crore rupees.4 It argued that setting a lower value may lead to the transfer of large number of cases which may overburden the commercial courts.
Therefore, the purpose behind their establishment may be defeated. And so, as a consequence of such an argument, the addition of the clause 12A in the 2018 amendment combats this issue and makes pre institution of mediation with respect to commercial disputes mandatory thereby even enhancing and reinstating the significance of the authorities established under the legal services authorities act, 1987.
The Government, on May 3, 2018, promulgated an Ordinance (Ordinance) amending the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015 (Act). These amendments are an attempt to expand the scope of commercial courts in India.
To talk about some of the major changes brought about by the amendment through the ordinance, it is important to note that the ordinance reduces the value involved in dispute specified under the commercial courts and commercial divisions in high court from one crore rupees to 3 lakhs. Under the ordinance state government may constitute commercial courts at the district judge level, obviously after consultation with the respective high court. While the original act had banned such commercial courts to be constituted in cases where high court has original jurisdiction to hear such cases, the ordinance and the subsequent amendment repeals this and allows the state to constitute commercial courts where the high court has original jurisdiction.
This helps in the institution of cases of lesser value as well and significantly reduces the burden on courts and acts as an impetus towards a speedy, not-so-formal and a more cost-effective dispute resolution. another significant change is how under the act, if a counterclaim was filed in a commercial dispute of at least one crore rupees in a civil court, the civil court should transfer the suit to a commercial court. As a consequence of the ordinance, this provision relating to transfer of suits has been repealed.
Apart from this, the main point regarding the difference the ordinance has brought about in the existing act is how it deals with mediation. A provision for mandatory mediation has been made applicable in those cases wherein no urgent -relief is sought by the parties to the dispute. As elaborated previously upon, the mediation may be conducted by the authorities constituted under the legal services authorities act,1987 such as lok adalats, arbitration institutions etc.
Medarb is a hybrid between arbitration and mediation. The practice of combining the mediation and arbitration processes is known as both Med-Arb and Arb-Med, depending on which process was initiated first. Medarb combines the benefits of mediation with the certainty of arbitration. This process involves the same person acting both as a mediator in seeking to facilitate a settlement between the parties, and as an arbitrator to determine the issues in dispute and issue a final and binding award. Mediation and Arbitration are used in conjunction with one another and, in the truest form of Med-Arb, the same third-party neutral plays the role of both mediator and arbitrator.
The development of Med-Arb reflects the larger societal trend that has increasingly linked judicial procedure with various forms of less formal, more practicable processes for resolving conflict. Like the court process, arbitration has been subject to the same call for more expedient “alternatives” for resolving disputes. Having many of the formalities of court adjudication, arbitration is criticised as slow, expensive, formalistic and unnecessarily adversarial. At the same time, the growth of mediation in the 1970s and its extension to a wide range of commercial disputes resulted in the “growing interaction” of arbitration and mediation.
Med-Arb is a natural outgrowth of this trend and it provides a mediation ‘window’ available to the parties at any stage of arbitration. In a dispute resolution environment where mediation and arbitration often occur in sequential order, it makes sense to have the same neutral perform both functions, if feasible. This is particularly so when, in keeping with the law-centered model of mediation, the parties already expect the mediator to be adept at formulating optimal settlement strategies based on legal and technical norms and industry practice.
In this context, the mediator already has tremendous power of persuasion based on his expert authority to evaluate the likely outcome of the case if it went to trial, and his knowledge of how other cases in the same commercial sector have been settled in the past. Whereas in arbitration, the neutral has the ultimate degree of decision-making power by virtue of his authority to create a final and binding settlement.
ADVANTAGES OF MED-ARB
•An arbitrator is usually familiar with the case, the parties, and their counsel representing them, and is therefore best placed to identify the most appropriate time in the proceedings to hold mediation.
•Med-Arb is an efficient way of reaching an early settlement either by bringing the parties closer together or by giving an early indication of the likely outcome of the formal proceedings, and thereby encouraging the parties to settle the matters or some of the matters out of many disputed matters.
•Any settlement which is reached during Med-Arb can subsequently be recorded in the form of a final award by the tribunal, which would then benefit from the enforcement regime under the New York Convention.
•Mediation under the facilitative approach can be particularly beneficial where there is an on-going business relationship which the parties would like to preserve. Indeed, a mediated settlement can cover issues outside the scope of the immediate dispute, and can therefore have a positive outcome on the relationship between the parties going forward.
•Arb-Med can be structured in a way which is both effective and avoids breach of confidentiality. In this method, the neutral first sits as an arbitrator and prepares the award. The neutral then switches to mediation and attempts to bring about a settlement, and if the attempt is successful, the settlement agreement is made into an arbitral award by consent.
•The author feels that another method can be evolved where two arbitrators and co-mediators as neutrals can try and adopt the above-mentioned process.
•Parties to an ongoing business relationship have a mutual interest in being able to resolve inevitable disputes expediently, privately, and in a fair, even-handed way, so that they can move forward. Med-Arb is an especially appealing option for disputes that the parties view as ‘irritants’ to a valuable commercial relationship (e.g. manufacturer-distributor, joint venture, or marketing relationship) that both sides see as “more important than the stakes involved in such disputes”.
•There are concerns as to whether one person can perform both roles. To address these, the neutral can try different methods like not holding private sessions in mediation. The neutral first sits as an arbitrator and prepares the award which he can do separately without revealing it to any party. If the attempt is successful, the settlement agreement can be made into an arbitral award by consent and the parts of the mediation that work can be added in the award.
•As far as laws that regulate, permit or engage mediation by arbitrators with the consent of the parties, mention can be made of the arbitration enactments of different countries in the international arena such as those in Australia, Brazil, China, Singapore, Hong Kong, and India and the rules of the World Intellectual Property Organisation (WIPO).
In Asia, however, Med-Arb is a familiar practice. Although parties in Asian jurisdictions will still commence formal arbitration or litigation proceedings at the beginning of a dispute as a strong message of their intent, the same parties are often willing to engage in informal or formal mediation processes, since the commercial culture tends to favour a negotiated settlement. Indeed, arbitral tribunals and courts in Asian and other civil law jurisdictions often strongly encourage settlement, and in particular mediation, during the course of the formal proceedings.
Given the right circumstances, Med-Arb has some enormous advantages over mediation and arbitration alone. It is up to each of us as conflict resolution professionals to understand the options available to the parties.
PRE-INSTITUTION OF COMMERCIAL MEDIATION THROUGH ORGANISATIONS
Given that commercial disputes constitute a significant proportion of disputes involving Indian parties, urgent legislative, institutional and attitudinal reforms are required to promote commercial mediation. In light of this, the introduction of mandatory pre-institution mediation could provide much-needed impetus to promote commercial mediation, enhance the acceptance of mediation as a viable and preferred dispute resolution mechanism in India and further larger objectives of improving India’s Ease of Doing Business ranking and facilitating quicker resolution of commercial disputes.
Organisations like International Centre for Alternate Dispute Resolution (ICADR), Association for International Arbitration (AIA), Indian Institute of Arbitration and Mediation (IIAM) have supported this country in the above causes. They have not only provided people of India with a platform to resolve issues without court procedures but also helped the courts of India reduce case burdens.
The justice dispensing system in India has come under great stress for several reasons, chief of them being the huge pendency of cases in courts underlining the need for Alternative Dispute Resolution (ADR) methods. The Government of India thought it necessary to provide a new forum and procedure for resolving international and domestic commercial disputes quickly and that is how ICADR came into picture.
The government felt in a developing country like India with major economic reforms under way within the -work of rule of law, strategies for swifter resolution of disputes for lessening the burden on the Courts and to provide means for expeditious resolution of disputes, there is no better option but to strive to develop alternative modes of dispute resolution by establishing facilities for providing settlement of disputes through arbitration, conciliation, mediation, negotiation, etc.
The ICADR is an autonomous organisation with its headquarters at New Delhi and Regional Centres at Hyderabad and Bengaluru. The Regional Centres of ICADR are fully funded and supported by the respective State Governments.
With such Indian organisations branching out , court burden and many other commercial issues can be resolved faster than expected and help India develop as a country.
In India, while judges have been quick to recognise increased use of mediation as a helpful mechanism for reducing case backlogs and delays, Indian lawyers have not rushed to embrace mediation.While urgent reforms are required to promote mediation in India, and in particular commercial mediation, any such reform requires an enabling environment to succeed, which India currently lacks. Allocation of the responsibility to the LSA Authorities reflects short-sightedness and lack of careful thought on the part of the legislature. Now that only the President’s assent is required to make the Bill into law (which will almost certainly be given), it remains to be seen how this reform will work in practice. A silver lining, perhaps, is that this Bill may hopefully generate discussion and awareness about commercial mediation, which could lead to more sensible initiatives and reforms in the future. Also, understandably, Indian lawyers view mediation as potentially depriving them of income by settling cases prematurely and thereby obviating legal fees that would otherwise be earned.
Once it is understood that mediation is intended to complement (not replace) the judicial process, that it is highly adaptable to different contexts, and that expertise in India is already growing rapidly, the apprehensions may quickly dissipate.
Finally, it would be apt to say that Mediation can only be achieved if we understand that this fast-paced process of ADR is not an independent procedure but procedure that is connected with the judicial system and that compliments and does not supplant the justice system as a whole. In achieving this level of understanding the litigants must put their faith in court annexed mediation which is a vital element in development and evolution of Mediation as Dispute Resolution system preferred than other systems prevalent in the legal framework. Mediation can be effectively used and can be implemented properly since this is getting desirable results pertaining to Alternative Dispute Resolution I think the Offspring’s of Mediation like MEDARB can also be created and effectively used.