Mediation is essentially a process of negotiation in which conflicting parties come together to resolve a dispute with the assistance of a neutral mediator. The mediator merely facilitates the resolution of the dispute by creating a congenial environment and suggests solutions, but at the same time, lacks the authority to pronounce a judgment on the matter. Along with conciliation, mediation as an alternate mode of redressal of disputes offers flexibility, participation and the consensus of all parties and is both time and cost-effective.
Over the past couple of years, there has been a concerted push to promote alternative modes of dispute resolution in India. While arbitration has been preferred over mediation and conciliation for a variety of factors, mediation is slowly gaining currency with statutory backing. The Companies Act, 2013 (Companies Act) introduced a provision that authorises the Central Government to maintain a ‘Mediation and Conciliation Panel’ that provides mediation between parties during any pending proceedings before the Central Government, National Company Law Tribunal (NCLT) or National Company Law Appellate Tribunal (NCLAT).
In September 2016, the Ministry of Corporate Affairs (MCA) issued a notification of the Companies (Mediation and Conciliation) Rules, 2016 (Rules), which provides provisions for conducting mediation or conciliation:
- Role of the mediator or conciliator – The mediator or conciliator shall facilitate voluntary resolution of disputes of the parties by communicating the view of each party to the other, assist them in identifying issues, reduce misunderstanding, and explore areas of compromise.
- Mediator or conciliator not bound by the Indian Evidence Act, 1872 or Code of Civil Procedure, 1908 – The mediator or conciliator shall be guided by the principles of fairness and natural justice, having regard to the rights and obligations of the parties and the circumstances of the dispute.
- Time frame for completion of mediation or conciliation – The total time frame provided to the mediation and conciliation panel is three months from the date of appointment of the expert, which can be extended for another three months. In essence, dispute resolution through these modes is capped at six months.
- Decision of the mediator or conciliator not binding upon the parties – The Rules state that the parties should mutually arrive at a decision to resolve the dispute through mediation and the mediator or the conciliator cannot impose a decision on the parties.
- Matters which cannot be referred to mediation and conciliation – Certain criminal, non-compoundable matters, such as those involving allegations of fraud and public interest cannot be submitted to mediation or conciliation.
Mediation and conciliation – Are they two sides of the same coin?
The heading of section 442 of the Companies Act is ‘Mediation and Conciliation Panel’. However, Section 442 (1) states that this panel is for ‘mediation’ between the parties during any pending proceedings before the Central Government, the NCLT or the NCLAT under the Companies Act, which uses the terms ‘mediation’ and ‘conciliation’ interchangeably. Further, there is no difference in the role, qualifications, disqualifications or procedures to be adopted by the mediator or conciliator for the resolution of disputes as per the Rules.
Status under other acts
The Code of Civil Procedure, 1908 refers to mediation and conciliation as two different mechanisms for redressal of disputes and does not refer to them interchangeably. Further, conciliation is governed by the provisions of the Arbitration and Conciliation Act, 1996 (Arbitration Act) while in mediation the parties have to follow such procedures as may be prescribed by the court. Until now, there seemed to be a distinction between mediation and conciliation; however, the Rules have now opened the window for confusion and ambiguity.
Non-binding nature of mediation
The success of mediation in resolving disputes is largely dependent upon the bonafide use of the process. Due to the non-binding nature of mediation, there arises a risk that a party with a mala fide intention may agree the negotiation in order to delay the delivery of justice rather than expedite it. While the principle behind the Rules is to offer the parties every opportunity to resolve the dispute in an amicable manner, the threat of both entities resorting to mediation as dilatory tactics cannot be avoided.
Also, the Arbitration Act was amended in October 2015 by introducing various provisions to make arbitration a preferred mode of settlement of commercial disputes in a timely manner. Commercial divisions and commercial appellate divisions in high courts, and commercial courts in districts have also been established to expedite the redressal of commercial disputes. In the presence of these new laws which aim at the timely redressal of disputes, the role of mediation as a non-binding mechanism of dispute resolution is worth debating. With the MCA already notifying 174 members for its mediation and conciliation panel for 2016-2017, it remains to be seen if corporates choose to pursue a non-binding mediation mechanism or stick to the preferred arbitration mechanism.
Ramesh Vaidyanathan is currently managing partner at Advaya Legal and has been a commercial lawyer for over 20 years.
Mansi Singh is an Associate at Advaya Legal and oversees general corporate matters.
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