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 regular litigation.

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[1].

Pre-Institution Mediation- Overview

Section 12A[2] 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.[3] 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[4], 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 mediator.

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.

• Pre-litigation Mediation and Privacy Policy

  Privacy in a pre-litigation mediation can be formulated in two forms:
  
  • 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.[5] 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 compromised".
     

• Key Highlights of the Rules are as follows:

  Initiation of mediation process
  
  1. 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.
  2. In case no reply is obtained by the opposite party then the Authority shall issue final notice as specified above.
  3. 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 receipt.
  4. 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.
  5. 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.
  6. 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 parties.
      

• Procedure for Initiating Pre-Institution Mediation

  The following procedure has to be followed while conducting mediation:

  1. 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 parties.
  2. The Mediator may during the course of mediation hold meeting with the parties separately or jointly to have a better understanding of the issues;
  3. 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.
  4. Parties can also exchange settlement proposals with each other during mediation sitting either orally or in writing;
  5. 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;
  6. Once both parties reach to a harmonious settlement, same shall be reduced in writing by Mediator and signed by the parties and;
  7. Mediator shall provide the settlement agreement, in original, to all the parties and also forward a signed copy to the Authority; and
  8. 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 sittings.
      

Advantages

Instituting pre-initiation mediation holds many advantages over classical form i.e., litigation:

1. 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 proceedings.
    

2. Confidentiality

   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.
    

3. 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 good faith.

Disadvantages
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.

End-Notes:

1. The Commercial Courts Act, 2015, Section 2(1)(i), No. 4, Acts of Parliament, 1949 (India)
2. The Commercial Courts Act, 2015, Section 12(A), No. 4, Acts of Parliament, 1949 (India)
3. Aparna Gaur & Aarushi Jain, Pre-Institution Mediation Under the Indian Commercial Courts Act: A Strategic Advantage, Nitish Desai
   http://www.nishithdesai.com/fileadmin/user_upload/pdfs/NDA%20In%20The%20Media/News%20Articles/190506_A_Pre_Institution_Mediation_Under_the_Indian_Commercial_Courts_Act.pdf
4. Grundy v. Pinniger (1852) 1 LJ Ch 405.
5. Foxgate Homeowners’ Association v. Bramalea California, Inc (2001) 26 Cal.4th 1