Scope, voluntary pre-litigation mediation, timelines, confidentiality and the enforceability and limited challenge of mediated settlements.
The Mediation Act, 2023 is India's first general statute on mediation. It sets out a framework for pre-litigation mediation, for the conduct of mediation and for the enforcement of mediated settlement agreements. For creditors, the Act matters because it gives settlements reached through mediation a defined legal status. This note describes the main features. The Act is brought into force by notification, and a reader should confirm which provisions are in force at the time. It is general information, not advice on a particular dispute.
What the Act covers
The Act applies to mediation conducted in India where all or both parties are domiciled in India, or where the mediation is international and the settlement agreement is to be enforced in India, and to community mediation. It excludes certain disputes, such as those involving criminal prosecution, matters affecting the rights of third parties not before the mediator and others listed in the First Schedule. A commercial money dispute is within its scope.
Pre-litigation mediation
Section 5 allows parties, before filing a suit or proceeding of a civil or commercial nature, to attempt to settle the dispute through mediation, voluntarily and by mutual consent. Parties may also agree in their contract to mediate before litigating, and where there is a mediation clause, the court will take it into account. The Act is not a general compulsion to mediate in every case. For commercial suits of the specified value, Section 12A of the Commercial Courts Act, 2015 continues to require pre-institution mediation, and a reader should check how the two regimes operate together.
The process
- Commencement. Mediation begins on the date the respondent accepts the invitation to mediate. If there is no response within thirty days, the invitation is treated as declined.
- Mediator. The parties may choose a mediator by agreement, from a mediation service provider or otherwise. The mediator must disclose any conflict of interest.
- Duration. Mediation is to be completed within one hundred and eighty days, which the parties may extend by a further period of up to one hundred and eighty days.
- Confidentiality. Communications made during mediation are confidential, and may not be used as evidence in other proceedings, subject to listed exceptions.
- Interim relief. A party may apply to a court or tribunal for urgent interim relief while mediation is going on, without this being treated as a breach of the agreement to mediate.
The mediated settlement agreement
A settlement reached in mediation must be in writing and signed by the parties and the mediator. Under the Act, a mediated settlement agreement that is properly authenticated is final and binding and is enforceable in the same manner as a judgment or decree of a court. The parties may register it with the authority designated for the purpose, within the period the Act provides, for the purpose of evidence. A settlement agreement reached through court-referred or Legal Services Authority mediation is treated in the manner the Act provides.
Challenge
A settlement agreement may be challenged only on limited grounds: fraud, corruption, impersonation, or that the mediation was conducted in a matter that the Act does not permit to be mediated. The challenge must be made within ninety days of receiving the agreement, subject to a limited extension. That narrow ground gives a creditor a measure of confidence that a settlement reached in mediation will hold.
For a creditor
- Check the contract for a mediation clause and the steps it requires.
- If a settlement is reached, ensure it includes the amount, the instalment dates, the security, the consequence of default and the manner of enforcement.
- Have the agreement signed as the Act requires and consider registering it.
- Keep the limitation calendar running while mediation proceeds, and apply for interim relief if there is a risk to the assets.
Mediation is quicker and cheaper than most litigation. Its value in recovery depends on the care taken in documenting the settlement and in securing its performance, which is the subject of a separate note.
This note is general information on the law at the date of publication. It is not legal advice, and it should not be relied on without advice on the facts of a particular matter.
