“The New Mediation Act 2017 In Practice Trends In Commercial Disputes In India”

Abstract

The year 2017 represented a critical juncture in the evolution of Alternative Dispute Resolution (ADR) in India. While a standalone "Mediation Act" had not yet been enacted, the period was defined by significant legislative proposals, pivotal judicial interventions, and a rapidly shifting mindset towards consensual dispute resolution, particularly in the realm of commercial disputes. This article provides a comprehensive analysis of the practice and emerging trends of mediation in commercial disputes in India around 2017. It examines the existing legal framework that governed mediation at the time, primarily Section 89 of the Code of Civil Procedure, 1908, and the recently enacted Commercial Courts Act, 2015. The article delves into the implications of the draft Mediation Bill, which was under active consideration by the Law Commission and the government, creating an atmosphere of anticipation. The core of the analysis focuses on the key trends shaping commercial mediation practice, including the catalytic role of the judiciary in promoting court-annexed mediation, the gradual acceptance of mediation by corporations and legal counsel, the initial steps towards mediator professionalization, and the early-stage discussions on online dispute resolution. Furthermore, the article identifies the significant challenges that impeded mediation's growth, such as the absence of a dedicated statute, issues with the enforceability of settlements, and a persistent adversarial legal culture. The conclusion assesses the trajectory of commercial mediation as it stood in 2017, arguing that it was a period of foundational growth, setting the stage for the future legislative overhaul that would be necessary to unlock its full potential.

Keywords: Mediation in India 2017, Commercial Disputes, Alternative Dispute Resolution (ADR), Section 89 CPC, Commercial Courts Act 2015, Court-Annexed Mediation, Draft Mediation Bill, India.

1. Introduction: The Pre-Legislative Landscape of Mediation in 2017

By 2017, the Indian judiciary was grappling with a crisis of delay and backlog that threatened to undermine the country's economic ambitions. With over 30 million cases pending across various courts, commercial litigation was often synonymous with protracted timelines, exorbitant costs, and procedural complexity. This environment posed a significant deterrent to investment and ease of doing business. In response, Alternative Dispute Resolution (ADR) mechanisms, and mediation in particular, were gaining unprecedented traction as a viable solution to decongest the courts and provide efficient justice.

The year 2017 is a fascinating point of study because it existed in a state of legislative anticipation. While India had no standalone Mediation Act, the ecosystem was buzzing with activity. The Commercial Courts Act, enacted in 2015, had established a specialized framework for commercial disputes, implicitly endorsing ADR. The judiciary, led by the Supreme Court, was actively championing mediation through court referrals and landmark judgments. Most importantly, a draft Mediation Bill was under serious deliberation, signaling the government's intent to formalize the process. This article explores the practical application of mediation in commercial disputes during this dynamic period. It moves beyond the black letter of the law to examine how the existing framework was being utilized, what trends were emerging on the ground, and what challenges stakeholders faced in the absence of a comprehensive statute. The focus is on the "practice" and "trends" as they were unfolding, providing a snapshot of a system in transition.

2. The Legal Framework Governing Mediation circa 2017

In 2017, mediation in India was primarily governed by a patchwork of procedural laws and court-driven initiatives, rather than a unified statute.

2.1. Section 89 of the Code of Civil Procedure, 1908:

This was the cornerstone of court-referred mediation. Introduced in 1999 through an amendment, Section 89 empowered civil courts, where it appeared to them that there existed an element of a settlement, to refer the dispute to five ADR methods: Arbitration, Conciliation, Judicial Settlement, Lok Adalat, or Mediation. The Supreme Court's landmark judgment in Salem Advocate Bar Association, Tamil Nadu v. Union of India (2005) provided crucial clarity on its implementation, leading to the establishment of mediation centers across the country. For commercial disputes, this was the primary gateway to mediation once a suit had been filed.

2.2. The Legal Services Authorities Act, 1987:

This Act provided for Lok Adalats, which are conciliatory in nature. While not pure mediation, they represented a state-sponsored effort towards amicable settlement and contributed to building a culture of ADR.

2.3. The Arbitration and Conciliation Act, 1996:

This Act dealt primarily with arbitration and conciliation. While it did not govern mediation directly, its existence helped create a broader acceptance for private dispute resolution mechanisms.

2.4. The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015:

This was the most significant legislative development for commercial disputes prior to 2017. Although the mandatory pre-institution mediation provision (Section 12A) was introduced later in 2018, the 2015 Act itself emphasized speedy resolution of commercial disputes. It created a dedicated infrastructure (Commercial Courts and Commercial Divisions in High Courts) whose judges were generally more receptive to ADR, often actively encouraging parties to explore settlement through mediation under Section 89 CPC.

2.5. The Draft Mediation Bill:

A critical factor in 2017 was the circulation of a draft Mediation Bill by the government for stakeholder consultation. This draft bill aimed to consolidate and define the law relating to mediation. Its key proposed features, such as the enforceability of settlement agreements and the promotion of pre-litigation mediation, were already influencing discourse and practice, creating an expectation of future stability.

3. Key Trends in Commercial Mediation Practice in 2017

The interplay of the above factors gave rise to several distinct trends in the practice of commercial mediation.

3.1. The Dominance of Court-Annexed Mediation

The most prevalent form of mediation in 2017 was court-annexed mediation. Commercial Courts and Civil Courts routinely used their power under Section 89 CPC to refer disputes to mediation centers attached to the High Courts and District Courts. These centers became the nerve centers of mediation activity.

» Impact: This trend meant that the initial push for mediation was coming from the judiciary rather than from the parties themselves. It served as a massive training ground, exposing lawyers and litigants to the mediation process, often for the first time.

» Success Rate: These centers began reporting impressive success rates (often between 40-60%), which helped build credibility for mediation as an effective tool.

3.2. The Evolving, Yet Cautious, Mindset of Corporations and Legal Counsel

A significant shift was underway in the corporate world. In-house legal counsel, burdened by the cost and time of litigation, started viewing mediation more favorably.

» Trend: There was a growing trend of including mediation clauses in commercial contracts, though they were often generic and not well-drafted. Parties were also increasingly opting for mediation voluntarily, even before a suit was filed, recognizing its benefits in preserving business relationships.

» Challenge: However, a deep-seated adversarial mindset persisted. Many lawyers and clients still saw mediation as a sign of weakness or an unnecessary delay in the litigation process. The lack of a clear enforceability mechanism for settlements remained a major deterrent.

3.3. The Nascent Stage of Mediator Professionalization

The demand for mediators was rising, but the profession was still in its early stages of development.

» Source of Mediators: The majority of mediators were retired judges or senior advocates who underwent training programs conducted by the mediation centers and organizations like the International Centre for Alternative Dispute Resolution (ICADR).

» Trend: A trend towards specialization was beginning to emerge. Parties in complex commercial disputes involving joint ventures, construction, or intellectual property started seeking out mediators with specific subject-matter expertise, moving beyond the generalist model.

3.4. Judicial Activism as a Catalyst

The Indian judiciary, particularly the Supreme Court, emerged as the strongest proponent of mediation. In judgments like Afcons Infra Ltd. v. Cherian Varkey Construction Co. Pvt. Ltd. (2010) and K. Srinivas Rao v. D.A. Deepa (2013), the Court had already provided important guidance. In 2017, this proactive approach continued, with courts at all levels actively "suggesting" and often strongly persuading parties to attempt mediation. This judicial push was instrumental in driving the trend.

3.5. The Emergence of Institutional Mediation

While court-annexed mediation dominated, private institutional mediation was beginning to gain a foothold. Institutions like the ICADR and mediation centers set up by industry bodies (e.g., FICCI, CII) started offering their services. The trend was towards creating a more professional, structured, and predictable process than what was sometimes available in the overburdened court-annexed system.

3.6. Early Inklings of Online Dispute Resolution (ODR)

Although not widespread, the concept of using technology for mediation was being discussed. The "Digital India" campaign and increasing internet penetration created a fertile ground for early experiments with online mediation, particularly for disputes where parties were geographically dispersed.

4. Critical Challenges and Impediments in 2017

Despite the positive trends, the absence of a dedicated Mediation Act posed significant challenges.

4.1. The Enforceability Conundrum

This was the single biggest hurdle. A settlement agreement arrived at through court-annexed mediation was typically recorded as a consent decree under Order XXIII Rule 3 of the CPC, making it enforceable. However, a settlement achieved through a private mediation process (without court reference) was treated as a mere contract. If a party breached it, the other party had to file a fresh suit for its enforcement, defeating the very purpose of a speedy resolution. This created uncertainty and discouraged parties from opting for private mediation.

4.2. Lack of Statutory Clarity on Confidentiality

While confidentiality was considered a fundamental principle of mediation, it lacked robust statutory backing. The evidentiary privilege under Section 75 of the Arbitration and Conciliation Act, 1996, applied to conciliation, but not explicitly to mediation. This created apprehension among parties about whether disclosures made during mediation could be used against them in court if the mediation failed.

4.3. Inconsistency in Process and Quality

The process of mediation varied significantly across different mediation centers and institutions. There were no uniform national standards for mediator training, accreditation, or ethical conduct. This led to inconsistencies in the quality of mediation services, affecting its credibility.

4.4. Cultural Resistance

The legal profession's deep-rooted adversarial culture was a major impediment. Many lawyers were untrained in mediation advocacy and approached the process with a litigation mindset, hindering effective negotiation and problem-solving.

5. The Draft Mediation Bill, 2017: A Beacon of Change

The circulating Draft Mediation Bill was a central point of discussion in 2017. It promised to address the core challenges:

» It proposed to make mediated settlement agreements directly enforceable as if they were a court decree.

It provided a statutory basis for confidentiality.

» It envisaged the creation of a Mediation Council to regulate the profession and promote institutional mediation.

» The very existence of this draft bill was a trend in itself. It created a sense of anticipation and encouraged stakeholders to align their practices with the expected future legal framework.

6. Conclusion: 2017 as a Foundational Year

In retrospect, 2017 was not the year of a "New Mediation Act," but it was a pivotal year of preparation. The trends indicate a system straining towards formalization. The practice of commercial mediation was growing organically, driven by judicial will and practical necessity, even in the face of significant legislative gaps.

The court-annexed model had successfully introduced mediation to the mainstream. Corporations and lawyers were on a steep learning curve, gradually appreciating the strategic value of mediation. The discussions around the Draft Mediation Bill reflected a collective understanding of what was needed to make India a mediation-friendly jurisdiction.

The period around 2017 can thus be best described as the end of mediation's infancy and the beginning of its adolescence. The foundations were being laid—through judicial pronouncements, the Commercial Courts Act, and the lived experience of successful settlements—for a future where mediation would become an integral, first-choice option for resolving commercial disputes. The stage was set for the comprehensive legislation that would be required to consolidate these gains and propel India into the next phase of its ADR journey. The trends of 2017 clearly pointed towards an inevitable and necessary legislative evolution to fully harness the power of mediation.

Here are some questions and answers on the topic:

1. Question: What was the most significant legal provision for mediating commercial disputes in India around 2017, and what was its primary mechanism?

Answer: The most significant legal provision for mediating commercial disputes in India around 2017 was Section 89 of the Code of Civil Procedure, 1908. Its primary mechanism was to empower civil courts, including the newly established Commercial Courts, to refer cases to various Alternative Dispute Resolution methods, including mediation, where it appeared to the court that there existed a possibility of a settlement. This was the foundational legal authority that allowed judges to actively channel disputes away from the traditional litigation track and into court-annexed mediation centers, making it the most common form of mediation practice at the time.

2. Question: How did the Commercial Courts Act, 2015, influence the trends in commercial mediation even before the introduction of mandatory pre-litigation mediation?

Answer: The Commercial Courts Act, 2015, significantly influenced commercial mediation trends by creating a specialized judicial framework dedicated to the efficient resolution of commercial disputes. Although the mandatory pre-institution mediation clause was introduced later in 2018, the very establishment of Commercial Courts and Commercial Divisions in High Courts meant that these specialized judges were inherently more proactive and receptive to ADR. They frequently and actively used their powers under Section 89 of the CPC to refer cases to mediation, thereby fostering a culture of settlement within the commercial litigation ecosystem and accelerating the adoption of mediation for business disputes.

3. Question: What was the single biggest challenge parties faced when opting for private mediation instead of court-annexed mediation in 2017?

Answer: The single biggest challenge was the significant uncertainty regarding the enforceability of settlement agreements resulting from private mediation. Unlike court-annexed mediation, where a settlement could be recorded as a consent decree enforceable by a court, a settlement achieved through a private mediation process was treated merely as a contract. If one party breached the agreement, the other party was forced to initiate a fresh lawsuit for its enforcement, which was a time-consuming and costly process that negated the core benefits of mediation. This enforceability gap was a major deterrent for commercial parties considering private mediation.

4. Question: What role did the Indian judiciary play in promoting mediation as a trend for resolving commercial disputes during this period?

Answer: The Indian judiciary, particularly the Supreme Court, acted as the principal catalyst and most influential promoter of mediation. Through landmark judgments and ongoing judicial activism, the courts consistently emphasized the benefits of mediation and strongly encouraged, and often persuaded, litigating parties to attempt settlement through this process. This proactive stance from the highest levels of the judiciary legitimized mediation in the eyes of lawyers and corporations, creating a powerful top-down trend that drove its adoption and integrated it into the routine handling of commercial cases.

5. Question: Why was the Draft Mediation Bill, which was under discussion in 2017, considered so crucial for the future of commercial dispute resolution in India?

Answer: The Draft Mediation Bill was considered crucial because it promised to directly address the fundamental weaknesses in the existing mediation framework. It proposed to give mediated settlement agreements the legal status of a court decree, making them directly enforceable and eliminating the largest source of uncertainty. Furthermore, it aimed to provide a robust statutory basis for confidentiality and establish a regulatory body to standardize mediator training and ethical practices. The Bill represented the anticipated legislative evolution needed to transform mediation from a court-assisted process into a mature, standalone, and reliable system that commercial parties could choose with confidence.

Disclaimer: The content shared in this blog is intended solely for general informational and educational purposes. It provides only a basic understanding of the subject and should not be considered as professional legal advice. For specific guidance or in-depth legal assistance, readers are strongly advised to consult a qualified legal professional.