"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well."

-Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Saturday, August 18, 2012

Guest Post:: Mediation and Conciliation under Indian Law

Ms. Madhavi Nalluri, Associate, Amarchand & Mangaldas & Suresh A Shroff & Co has written this descriptive post on the state of Mediation and Conciliation in India.
Until 1996, the law governing arbitration in India consisted mainly of three statutes: (i) the 1937 Arbitration (Protocol and Convention) Act, (ii) the 1940 Indian Arbitration Act, and (iii) the 1961 Foreign Awards (Recognition and Enforcement) Act.4 The 1940 Act was the general law governing arbitration in India along the lines of the English Arbitration Act of 1934, and both the 1937 and the 1961 Acts were designed to enforce foreign arbitral awards (the 1961 Act implemented the New York Convention of 1958). The government enacted the Arbitration and Conciliation Act, 1996 (the Act) in an effort to modernize the outdated 1940 Act. The 1996 Act is a comprehensive piece of legislation modeled on the lines of the UNCITRAL Model Law. This Act repealed all the three previous statutes (the 1937 Act, the 1961 Act and the 1940 Act). Its primary purpose was to encourage arbitration as a cost-effective and quick mechanism for the settlement of commercial disputes. The Act covers both domestic arbitration and international commercial arbitration.[i] Thus, up till the enactment of this Act, arbitration was the only recognized exception to traditional court litigation. Conciliation, mediation or any other alternative dispute resolution procedures were not permissible for settling civil disputes between parties.[ii]

ADR is now an integral segment of modern practice in India. In order to accord statutory recognition to ADR including mediation, the Law Commission in its 129th Report made recommendation for making it obligatory for the Court to refer the dispute to ADR including mediation for settlement.

The ADR framework in India finds statutory recognition in a two –fold manner:
(i) Under the Arbitration and Conciliation Act 1996 and
(ii) Under Section 89 of Code of Civil Procedure 1908 read with Order X, Rules 1A, 1B and 1C

As a part of the scheme under Section 89 of the Code,[iii] various High Courts in India framed their own rules with respect to mediation and conciliation.[iv] The mediations and/or conciliations happening under the aegis of the respective High Courts resort to the said rules for proper implementation of the ADR methods.

As can be seen from the two statutes, the Act covers (a) arbitration and (b) conciliation whereas the Code is wider in its scope and covers five kinds of ADR mechanisms one adjudicatory – arbitration and four non-adjudicatory - (a) conciliation, (b) judicial settlement, (c) settlement through Lok Adalat and (d) mediation.

In the modern techniques of dispute resolution of commercial conflicts, emphasis has drifted from litigation to arbitration. As things are never static, emphasis is further sliding from arbitration to alternative dispute resolution procedures. Apart from arbitration, which is primarily dealt with under the Act[v], the other forms of ADR which are being seen as popular choices include ‘mediation’[vi] and ‘conciliation’. Whilst arbitration is a more formal adjudicatory process, conciliation offers greater flexibility to the parties as it is facilitative, non-adjudicatory and yet binding if the parties reach a settlement.[vii] Conciliation may play a pivotal role, particularly in settling commercial disputes. It is more economic, convenient, speedy and less formal mode of dispute resolution.

There exists much confusion and ambiguity with respect to the meaning of the terms ‘mediation’ and ‘conciliation’. In India, though Section 89 treats the two as being different from each other, in some jurisdictions like the US the terms are used interchangeably.[viii] Let us understand the concepts of ‘conciliation’ and ‘mediation’ under the Indian law.

What is conciliation?
Conciliation is statutorily regulated by the Arbitration and Conciliation Act, 1996 but not defined by that statute. Section 67(1) of the Act however impliedly defines “conciliation” as assistance rendered by a conciliator or parties to a dispute, in an independent and impartial manner, in their attempt to reach an amicable settlement of their dispute.[ix] Confidentiality of conciliation proceedings has been statutorily guaranteed under Section 75 of the Act.

What is mediation?
The interpretation accorded by the Supreme Court to Section 89(2) (c)[x] makes mediation a non-binding, non-adjudicatory dispute resolution process, where a neutral third party renders assistance to the parties in conflict to arrive at a mutually agreeable solution. To put it differently, it refers to a voluntary and flexible negotiated conflict resolution process with the assistance of experts. It involves a structured negotiation where the mediator listens to the parties, ascertains the facts and circumstances as also the nature of the grievance, conflict or dispute, encourages the parties to open up to identify the causes therefor, creates a conducive atmosphere to enable the parties to explore various alternatives and ultimately facilitates the parties to find a solution or reach a settlement. In short, it is a professionally and scientifically managed negotiation process.[xi]

The confidential nature of the mediation proceedings was upheld by the Supreme Court in its decision in Moti Ram v. Ashok Kumar (2011) 1 SCC 466 where it observed that in the event the mediation is successful the mediator should only send the agreement executed between the parties to the Court and not mention what actually transpired in the proceedings. However, if the mediation is unsuccessful, the mediator is expected to send only a statement to the court conveying the failure of the mediation proceedings.

Although ‘mediation’ and ‘conciliation’ may seem fairly similar to each other a key distinction lies with respect to recognition and enforceability of the settlement arrived at through the two- methods. If the parties arrive at a settlement through conciliation the Agreement is enforceable as if it is a decree of the court whereas a settlement reached at in mediation needs to be placed before the court which will make it a decree.[xii]

There is a growing concern as regards the interventionist stance adopted by the Courts with respect to arbitration. The business community as well as the legal fraternity has time and again hinted at the need for the courts to re-look at the way arbitration is perceived to make it an effective alternative remedy.

The Supreme Court has assumed a proactive role while dealing with ADR and went to the extent of setting out the manner in which courts should approach/recommend the ADR methods to litigants under Section 89.[xiii]

It is therefore heartening to see the trend evinced by the various Supreme Court decisions cited earlier which point towards a more conducive approach being adopted by the courts with respect to mediation and conciliation. The two can be seen to be gaining momentum thereby making the ADR system in the country an effective means of tackling the problem of arrears as well as providing comfort to the business community.

[i]Sarma K., Oinam M. & Kaushik A., (October 2009) Development and Practice of Arbitration in India – Has it evolved as an effective legal institution? Working Papers, CDDRL Stanford http://iis-db.stanford.edu/pubs/22693/No_103_Sarma_India_Arbitration_India_509.pdf

[ii] Malhotra, O.P and Indu, The Law and Practice of Arbitration and Conciliation, Lexis Nexis, 2nd Edn. at page 63

[iii]Discussing the intent behind introducing Section 89 in the Code, the Supreme Court in Salem Advocate Bar Association v. Union of India AIR 2003 SC 189 held (in paragraphs 9 and 10):

It is quite obvious that the reason why section 89 has been inserted is to try and see that all cases which are filed in court need not necessarily be decided by the court itself. Keeping in mind the law’s delays and the limited number of judges which are available, it has now become imperative that resort should be had to alternative dispute resolution mechanism with a view to bring to an end litigation between the parties at an early date.”

[iv]See http://www.delhimediationcentre.gov.in/MediationConciliation.htm - Mediation Conciliation Rules 2004 framed by Delhi High Court; http://bombayhighcourt.nic.in/libweb/rules/R2006.01.html - Civil Procedure Alternative Dispute Resolution Rules, 2006 framed by the High Court of Bombay.

[v] The Act would apply if there exists an arbitration clause in an agreement between the parties. In absence of an express agreement to arbitrate, a court can only direct parties to a suit/proceeding to arbitrate upon mutual consent and cannot force the parties to arbitrate.

[vi] The Delhi Mediation Centres statistics shows that out of 42984 cases referred to mediation, 25038 cases have been settled as on June 2011. http://www.delhimediationcentre.gov.in/april-2011.pdf

[vii] Section 74 of the Act accords sanctity of an arbitral award to a settlement arrived at between the parties in a conciliation proceeding.

[viii] Henry J. Brown and Arthur L. Mariot, ‘ADR Principles and Practice’ (1997, 2nd Ed. Sweet & Maxwell, Lord on Chapter 7, p. 272)

[ix] Justice R.V. Raveendran , Mediation – Its importance and relevance, (2010) 8 SCC (Jour) 1

[x]In Afcons Infrastructure Ltd. and Anr. v. Cherian Varkey Construction Co. (P) Ltd. and Ors. (2010) 8 SCC 24 (at paragraphs 15 and 16) – “……. for "mediation", the court shall refer the same to a suitable institution or person and such institution or person shall be deemed to be a Lok Adalat and all the provisions of the Legal Services Authority Act, 1987 (39 of 1987) shall apply as if the dispute were referred to a Lok Adalat under the provisions of that Act.”

[xi] Justice R.V. Raveendran , Mediation – Its importance and relevance, (2010) 8 SCC (Jour) 1

[xii] In Afcons Infrastructure Ltd. and Anr. v. Cherian Varkey Construction Co. (P) Ltd. and Ors. the Supreme Court dealt with the ADR system in India and clarified a key distinction between ‘mediation’ and ‘conciliation’ in paragraph 27 as under:

“………When a matter is settled through conciliation, the Settlement Agreement is enforceable as if it is a decree of the court having regard to Section 74 read with Section 30 of the Arbitration and Conciliation Act. Similarly, when a settlement takes place before the Lok Adalat, the Lok Adalat award is also deemed to be a decree of the civil court and executable as such under Section 21 of the Legal Services Authorities Act, 1987. Though the settlement agreement in a conciliation or a settlement award of a Lok Adalat may not require the seal of approval of the court for its enforcement when they are made in a direct reference by parties without the intervention of court, the position will be different if they are made on a reference by a court in a pending suit/proceedings. As the court continues to retain control and jurisdiction over the cases which it refers to conciliations, or Lok Adalats, the settlement agreement in conciliation or the Lok Adalat award will have to be placed before the court for recording it and disposal in its terms. Where the reference is to a neutral third party ('mediation' as defined above) on a court reference, though it will be deemed to be reference to Lok Adalat, as court retains its control and jurisdiction over the matter, the mediation settlement will have to be placed before the court for recording the settlement and disposal. Where the matter is referred to another Judge and settlement is arrived at before him, such settlement agreement will also have to be placed before the court which referred the matter and that court will make a decree in terms of it. ….” (emphasis supplied)

[xiii] In Afcons case [at paragraph 30 (f)] it held that the if parties are not agreeable for arbitration and conciliation, which is likely to happen in most of the cases for want of consensus, the court should, keeping in view the preferences/options of parties, refer the matter to any one of the other three other ADR processes: (a) Lok Adalat; (b) mediation by a neutral third party facilitator or mediator; and (c) a judicial settlement, where a judge assists the parties to arrive at a settlement.

(The views stated in the below post are the author's personal views and do not represent the views of anyone else.)

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