The Mediation Act, 2023

The Mediation Act, 2023 (the “Act”) was passed by the Rajya Sabha on August 1, 2023, the Lok Sabha on August 7, 2023, and was notified in the Gazette of India after receiving the assent of the President of India on September 15, 2023. First introduced in Parliament on December 20, 2021 (“2021 Bill”), the 2021 Bill was then referred to a Parliamentary Standing Committee (“Standing Committee”), which submitted its report to the Rajya Sabha chairperson on July 13, 2022.

The Act has been enacted to, “promote and facilitate mediation, especially institutional mediation, for resolution of disputes, commercial or otherwise, enforce mediated settlement agreements, provide for a body for registration of mediators, to encourage community mediation and to make online mediation as acceptable and cost effective process and for matters connected therewith or incidental thereto,” and has been seen as a welcome step in alleviating the growing pressures on an already overburdened judicial system. We have set out below some key features of the Act:

  1. Mediation Agreement: The Act requires every mediation agreement to be in writing, with the parties to the agreement agreeing to submit any dispute that may arise between them to mediation. The mediation agreement may be drafted either as a clause within any agreement, or may be executed as a separate agreement. The Act considers a mediation agreement to be “in writing” if it is: (i) executed as a document between parties; (ii) contained in an exchange of communications (including electronic communications for the purposes of the Information Technology Act, 2000); or (iii) contained in any pleadings where one party alleges the existence of such agreement, and the assertion is not denied by the other party.
  1. Pre-Litigation Mediation: The Act permits parties to a dispute (regardless of whether they have executed a mediation agreement) to voluntarily and mutually refer their dispute to mediation prior to filing a suit or instituting proceedings before any court. This provision is a departure from the 2021 Bill, which earlier required parties to mandatorily attend at least two mediation sessions, and may be attributed to the Standing Committee’s report, which recommended optional pre-litigation mediation instead.
  1. Exceptions: The Act also provides an indicative list of matters which cannot be referred to mediation thereunder. This includes disputes involving criminal offences, proceedings initiated in relation to the misconduct of any registered professional, and disputes relating to the levy and collection of any direct or indirect tax or refunds.
  1. Appointment of a Mediator: Unless otherwise agreed upon by the parties, a person of any nationality may be appointed as a mediator, provided that they possess the qualifications, experience and accreditation prescribed. The parties also have the liberty to select the mediator and the procedure for appointment. If the parties are unable to select the mediator or the procedure, the claiming party may make an application to a mediation service provider to appoint a mediator. Within 7 days from the receipt of the application, the mediation service provider shall either appoint a mediator as agreed by the parties, or a mediator from the panel maintained by it.
  1. Jurisdiction: The Act provides for every mediation initiated thereunder to be undertaken within the territorial jurisdiction of the court or tribunal competent to adjudicate upon the dispute. While, if the parties so agree, the mediation may be conducted at any other place or even online, for enforcement, challenge and registration of the mediated settlement agreement, the mediation will be deemed to have been undertaken within the territorial jurisdiction of such court or tribunal.
  1. Time Period: Mediation proceedings under the Act must be completed within a period of 120 days from the date of the first appearance before the mediator, which may be extended for a maximum period of 60 days.
  1. Mediated Settlement Agreement: Once the mediation has been successfully concluded (with respect to all or some of the disputes referred), the parties shall reduce the terms of settlement to a written agreement signed by the parties and duly authenticated by the mediator. Once authenticated, an unchallenged Mediated Settlement Agreement may be enforced in accordance with the provisions of the Code of Civil Procedure, 1908, in the same manner as if it were a judgment or decree passed by a court. A mediated settlement agreement may be challenged only on the grounds of fraud, corruption, impersonation, and where the mediation was impermissible under the Act (as provided above).

On August 11, 2023, an unstarred question on the disposal of cases through mediation centres was put forth before Mr. Arjun Ram Meghwal, the Minister of State (Independent Charge) of the Ministry of Law and Justice; Minister of State in the Ministry of Parliamentary Affairs; And Minister of State in the Ministry of Culture. The Minister reiterated the Government’s commitment towards encouraging and developing alternative dispute resolution mechanisms to, “enable timely dispensation of justice to the citizens of the country. It is the endeavour of the Government that judiciary and legislature work together for encouraging adoption of ADR mechanisms including mediation, for early resolution of disputes.”1 The Minister, inter alia, referred to the Act as one of the methods by which this is proposed to be done. While the Act is certainly a first step in ensuring the wider implementation of streamlined methods for dispute resolution, it has also received criticism for, amongst others, the lack of guidance on interim reliefs available to parties to a mediation.

Lok Sabha Unstarred Question No. 3903. Available at: https://legalaffairs.gov.in/sites/default/files/AU3903.pdf.