The Mediation Act, 2023: scheme, enforcement and status

1. Application (section 2)

The Act applies to mediation conducted in India where the parties reside, are incorporated or do business in India; where the agreement chooses the Act; in an international mediation; where a government or its agency is a party to a commercial dispute; and to other disputes notified by the Government.

2. Mediation agreement and pre-litigation mediation

• Mediation agreement (section 4): in writing, as a clause or a separate agreement, contained in a signed document, an exchange of communications (including electronic), or pleadings in which one side alleges it and the other does not deny it.
• Pre-litigation mediation (section 5): before filing a civil or commercial suit the parties may voluntarily and by mutual consent attempt mediation, whether or not there is an agreement; it is not compulsory. Commercial disputes of specified value go through section 12A of the Commercial Courts Act, 2015. Motor accident claims not settled under section 149 of the Motor Vehicles Act, 1988 are to be referred to mediation by the Claims Tribunal (section 5(6)).
• Disputes not fit for mediation (section 6 and First Schedule): disputes barred by law; claims against minors, deities and persons with mental illness or intellectual disability; suits for declaration of title against Government and declarations in rem; prosecution for criminal offences; professional disciplinary matters; disputes affecting third parties (except child interests in matrimonial disputes); matters within the National Green Tribunal; tax levy and penalties; Competition Act, TRAI, electricity, petroleum and SEBI proceedings; land acquisition compensation. A court may still refer compoundable offences, including compoundable matrimonial offences, to mediation, but the outcome goes back to the court and is not a decree (provisos to section 6(1)).
• Reference by court (section 7): a court or tribunal may refer parties to mediation at any stage and pass interim orders; the parties are not obliged to settle.

3. Mediators and proceedings

• Appointment (section 8): a person of any nationality (foreign nationals need specified qualifications); the parties are free to agree on the mediator and the procedure; failing agreement, the party seeking mediation applies to a mediation service provider, which within seven days appoints the mediator agreed by the parties or, if they cannot agree or the agreed person refuses, one from its panel with his consent. The provider considers suitability and the parties' preference (section 9).
• Conflict of interest (sections 10 to 12): written disclosure before and during the mediation; parties may waive in writing or seek termination of the mandate; a replacement is appointed within seven days.
• Place (section 13): within the territorial jurisdiction of the competent court, or elsewhere or online by consent.
• Commencement (section 14): on receipt of notice under an existing agreement; otherwise on the mediator's consent or the provider's appointment.
• Conduct and role (sections 15 to 17): independent, neutral and impartial; not bound by the CPC or the Evidence Act; language by consent; facilitative, with no power to impose; no dual role.
• Time limit (section 18): 120 days from the first appearance, extendable by up to 60 days by agreement.
• Confidentiality and privilege (sections 22 and 23), termination (section 24) on settlement, mediator's declaration, a party's opt-out, or expiry of time; costs shared equally unless agreed (section 25).

4. Mediated settlement agreement: sections 19 to 21

• A mediated settlement agreement is an agreement in writing between some or all of the parties, resulting from mediation, settling some or all of the disputes, and authenticated by the mediator; it may extend beyond the disputes referred. An agreement void under the Contract Act is not a lawful mediated settlement agreement (section 19(1) and Explanation).
• It must be reduced to writing and signed by the parties (section 19(2)), then submitted to the mediator, who authenticates it and gives each party a copy (in institutional mediation, through the service provider) (section 19(3)).
• It may be registered with a Legal Services Authority or a notified body within 180 days, for record (section 20).
• If there is no settlement, the mediator gives a non-settlement report that does not disclose the cause or the parties' conduct (section 21).

5. Enforcement and challenge: sections 27 to 29

• Section 27: a settlement signed by the parties and authenticated by the mediator is final and binding and is enforced under the CPC as if it were a judgment or decree of a court, and may be relied on by way of defence or set-off.
• Section 28: it may be challenged before the competent court only on the grounds of (i) fraud, (ii) corruption, (iii) impersonation, or (iv) mediation in a dispute not fit for mediation under section 6, within 90 days of receipt of the copy, extendable by 90 days for sufficient cause.
• Section 29: the period of mediation is excluded in computing limitation.

6. Other features

• Online mediation (section 30) with written consent, including pre-litigation mediation.
• Mediation Council of India (sections 31 to 38, in force): registers mediators, recognises mediation service providers and institutes, and lays down standards.
• Community mediation (sections 43 and 44): disputes likely to affect peace and harmony in a locality, by a panel of three community mediators constituted by the Legal Services Authority or the District or Sub-Divisional Magistrate, with prior consent of the parties. The settlement is not enforceable as a decree.
• Lok Adalats unaffected (section 26, in force).
• Amendments to other Acts (sections 59 to 65 and Schedules): a new section 89 CPC; Part III of the Arbitration and Conciliation Act replaced; section 18 of the MSMED Act, section 442 of the Companies Act, section 12A of the Commercial Courts Act and section 37 of the Consumer Protection Act recast for mediation. None of these is yet in force.

7. Problem

A dispute between A and B is settled through mediation, but the mediator has not signed the settlement. Advise. (December 2019)

Issue. Whether a mediated settlement is binding and enforceable without the mediator's signature.

Law. Under sections 19 and 27 of the Mediation Act, a settlement is enforceable as a decree only if it is signed by the parties and authenticated by the mediator. Until those sections are in force, court-annexed mediation follows the court's rules: the settlement is signed by the parties, forwarded by the mediator to the referring court, and the court passes a decree in its terms (Order XXIII Rule 3 CPC; Afcons). In private mediation not linked to a court, the settlement is a contract governed by the Indian Contract Act, 1872.

Application. The mediator's signature or authentication does not create the agreement; the parties' signatures do. It certifies that the agreement resulted from the mediation and starts the 90-day challenge period. So: (i) if A and B have signed, there is a binding contract between them, and either may ask the mediator to authenticate it, since section 19(3) casts that duty on him once a signed settlement is submitted; in institutional mediation the service provider can be approached if he fails to act; (ii) in a court-referred matter, the parties may place the signed settlement before the court and pray for a decree in its terms; (iii) once the Act is in force, without authentication the settlement cannot be enforced as a decree under section 27, though it remains enforceable by suit as a contract.

Conclusion. The settlement binds A and B as an agreement, but to obtain the decree-like enforceability of section 27 (or a decree from the referring court) it must be authenticated by the mediator or recorded by the court. A and B should have the mediator authenticate it now.

How this is examined

“Appointment of mediator” (short note, November 2021) is answered from sections 8 to 12. The unsigned-settlement problem (December 2019) is answered from sections 19 and 27 as above. A general question on mediation is improved by a paragraph on the Act's scheme, and by stating accurately which parts are in force.