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With a disputes system in crisis in the country, mediation is the way forward, write Max Life Insurance legal experts Amit Wadhwa and Richa Relhan.

The development of a society comes with the unintended byproduct of increased disputes and differences among its businesses, which makes it imperative to have fast, cost-effective dispute resolution mechanisms in place. Otherwise the cost of litigation, time and energy spent in dispute resolution may slow down the overall momentum required for developing economies.

Mediation is a key means of alternate dispute resolution (ADR) and is, as per the definition provided by the Mediation and Conciliation Project Committee of the Supreme Court: “A structured process where a neutral person uses specialised communication and negotiation techniques. A process of facilitating parties in resolving their disputes. A settlement process whereby disputing parties arrive at a mutually acceptable agreement.”

Historically, Confucius believed that the best way to resolve a dispute was through moral persuasion and agreement, rather than coercion. There is a natural harmony in human affairs that should not be disrupted.

Mediation in the commercial world

In commercial parlance, it’s called BATNA – the best alternative to a negotiated agreement. The concept of BATNA was explained in the bestseller, Getting to Yes, where authors Roger Fisher and William Ury employed the process of mediation in an organised and succinct way. The four key principles enumerated by the authors were:

    1. Separate the people from the problem;
    2. Focus on interests not, positions;
    3. Invent options for mutual gain; and
    4. Insist on objective criteria.
Amit Wadhwa
Amit Wadhwa
Head of litigation and assistant vice president
Max Life Insurance

India got its first taste of ADR in 2002, after the introduction of section 89 to the Code of Civil Procedure, 1908 (CPC), although the obligation to refer matters for ADR still remains discretionary and is not mandatory in all the states.

There has been an increase in acceptance to mediation over the years, and it gained impetus via the landmark decision of the Supreme Court in Salem Advocate Bar Association, Tamil Nadu v Union of India (2005). This case led to the constitution of a committee of the Supreme Court to enable effective implementation of section 89 to ensure quicker dispensation of justice.

The committee ultimately drafted the Model Rules for ADR and Mediation, which served as the starting point for various high courts in framing their own mediation rules. Further examining section 89 of the CPC, the Supreme Court, in Afcons Infrastructure Ltd and Ors v Cherian Varkey Construction Co (P) Ltd and Ors (2010), having regard to the tenor of the provisions of rule 1A of order 10 of the CPC, held that the civil court should invariably refer cases to the ADR process, except in certain recognised excluded categories of cases.

The time has come when the overburdened judicial system needs the help of the “addition by subtraction” concept, which denotes addition in value of work by reducing the steps popularly used by manufacturers in Japan in the early 1980s.

While all the parties in a dispute have rights vested as per the codes, the volumes can definitely be reduced by making commercial disputes referred mandatorily to ADR, leaving courts to adjudicate the matters that require all the complex procedures of evidence and the application of legal acumen.

Mediation as a pillar of ADR

In mediation, the process consists of dispute resolution where the mediator, the third neutral party, by using techniques, helps negotiate an agreement between the parties to the dispute by sharing common interests on a common platform with concrete effects. The concept stands on a different and easier footing compared with complex arbitration and its potential future litigation.

Richa Relhan
Richa Relhan
Legal Manager
Max Life Insurance

Mediation annexed with courts assists the parties to a dispute to make their own decisions about the resolution of their conflict. The mediators, however, in no manner can impose an outcome on either of the parties. Arbitration, on the other hand, is a process of dispute resolution that involves decision-making by a person, namely the arbitrator, which is more of a quasi-judicial nature.

The process and behaviour involved is such that it intends to describe the assemblage of acts and communications that go beyond any particular negotiation, and includes both a formal and informal manner of expression encompassing every expression that aids to resolve or minimise the differences or disputes.

Another form of mediation can be proceeded by impromptu informal negotiations or mediations, which can take place merely by gestures of agreement or disapproval by formally arranged meetings, or asynchronously. This method aims to find an objective standard that is based on precedents for reaching an agreement that will be acceptable to interested parties. In principled negotiation, instead of opting for transient positions, reliance is placed on the parties; enduring interests, objectively assessing existing resources and available alternatives.

Mediation in the present day

Mandatory mediation as a method of dispute resolution refers to the type of mediation where both parties involved in a dispute are obligated to be a part of the initial session of mediation. However, this process has room for decision-making and flexibility of both parties, as once the first session of mediation begins, the parties involved, despite having an obligation to be present, have the liberty to exit and move away from the process at any time.

As one scholar described the relationship between mediation and traditional litigation: Mediation is like an unwelcome, but invited, guest at the banquet table. The process aims to address the needs of the disputants and involves a natural procedure to resolve and address disputes before they are brought into a traditional litigation process.

An imperative change that this can bring about for the citizens of developing economies such as India is that the adoption of mandatory mediation can play a key role in ensuring swift and efficient justice. This is of paramount importance in a litigation-heavy system like India’s, where the backlog of cases becomes one of the biggest detriments to the development of an effective dispute resolution mechanism.

Online dispute resolution

Online dispute resolution (ODR) in its essence is a mode of dispute resolution that harnesses the use of modern-day technology to resolve disputes between two parties. ODR, like the accepted methods of ADR, has three types – negotiation, mediation and arbitration.

ODR as a field on its own has expanded and grown exponentially. The presence of information and communications technologies among dispute resolution is still evolving and the understanding of the same is in its infancy.

The scope of ODR includes the elimination of the process of physical personnel carrying out information management and the same renders several advantages. ODR is flexible and has a higher degree of creative liberty, meaning that it is not bound with the tedious formalities of physical appearance. Furthermore, ODR propagates an approach that is based on consent rather than adversity.

ODR is being widely accepted and integrated into economies around the world. Even the government is encouraging ODR, and launched the Samadhaan portal for micro, small and medium enterprises in 2017.

Should mediation be mandatory?

Even though in theory a mediated settlement programme is mandatory, it has many voluntary facets. The US and many countries in Europe are espousing various kind of measures in context to mediation, and many have encouraged voluntary mediation as an alternative to the litigation process. However, on the whole, studies suggest that the EU jurisdictions still do not support mandatory mediation.

Purist mediators and others believe a cornerstone of mediation is that it is a voluntary, consensual process, and making participation mandatory would be paradoxical. Through mandatory mediation, though, a decision can never be forced on parties during the process, and compelling them to attend the mediation would be enough to ensure that many more cases are resolved outside of traditional litigation. Surely this can only be a positive addition to the court process.

Pre-institution mediation

Most recently, in August 2022, the Supreme Court, in the case of M/s Patil Automation Private Limited v Rakheja Engineers Private Limited, opined on the scope of section 12A of the Commercial Court Act, 2015, which casts an obligation of pre-litigation mediation on the parties to the dispute.

The court, while placing reliance on the provisions of section 12, held that a suit filed in respect of a commercial dispute without initiating such mediation would be barred by section 12A and should be outrightly rejected under the CPC.

However, keeping the intent of the legislature alive, a specific reference to the exception carved out in the section was made where, for cases involving urgent interim relief, the filing of a commercial suit without complying with the mandate is permitted.

The process of mediation has achieved due importance in resolving disputes in recent years. The methodology focuses on a persuasive approach, however the concept of persuasion here should not be looked on in a pejorative manner. In practice, where this process is put to use, most mediators resort to asking questions than telling or making statements when attempting to persuade.

In India, mediation coupled with the additional component of ODR systems has led to the requirement of an additional level of training in which the current set of officials who can facilitate mediation are seriously lacking.

Indian courts have decided that only compoundable offences can be referred to mediation. However, due to a lack of uniformity in the process, there have also been instances where various non-compoundable offences have been sent for mediation.

ADR, whether physical or online, is a much-needed step in the direction of developing a more efficient and holistic justice mechanism that can tackle the issue of backlogs, and it cannot be said that there has been no progress in this direction.

However, the same cannot be done at the cost of the standard of justice being delivered, which is why it is imperative that adequate training is given and select professionals are employed as facilitators in the process of ODR.

The various advantages that the systems of ADR and ODR provide can only be utilised to their complete potential when such dispute resolution professionals are well-equipped and function within a well-regulated framework. Legal professionals hold great value in bringing about this change and will also be the ones that benefit the most from its effective implementation.

AMIT WADHWA is the head of litigation and assistant vice president, and RICHA RELHAN is a legal manager at Max Life Insurance. The views expressed are personal

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