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Compulsory Mediation in India – Party Autonomy v. The Court

[This article has been authored by Aditya Joby, a fifth-year law student from JGLS]

Keywords: Mediation, Tenancy, Compulsory, Litigation, Arbitration.

I. Introduction

The use of dispute resolution methods like mediation to resolve issues has become very predominant in India and the world. However, the implementation of such methods as pre-litigation dispute resolution could prove to worsen the current backlog of cases, and allow third parties to stall any form of negotiation. This article seeks to understand the viability of compulsory mediation in India with its current framework with respect to certain situations such as tenancy disputes in India as compared to other common law jurisdictions that have already applied such mandatory mediation. The article therein focuses on the use of the Retail Leases Act, 1994 as used in Australia and legislation in the United States such as the Federal Rules of Civil Procedure, or the Alternative Dispute Resolution Act, 1998, that encourages ADR for dispute resolution. This article would be divided into four main parts: the analysis of compulsory mediation itself, the comparison with other jurisdictions, the applicability of mediation in tenancy disputes and a conclusion on whether compulsory mediation is viable since Section 89 of the Civil Procedure Code allows third-party mediation organizations such as Sama and Just Act to enforce their mediated settlement agreements as arbitral awards.

The dilemma with the concept of mandatory pre-litigation mediation for tenancy disputes is that such disputes are already arbitrable since the dispute is considered as subjective rights in-personam, that arise from rights in rem. This is except for when they are covered by specific rent control laws that allow exclusive jurisdiction to particular forums. This decision was made after a 2017 decision of the Supreme Court in Himangni Enterprises v. Kamaljeet Singh Ahluwalia that ruled that when the Transfer of Property Act (TOPA), as applicable, the dispute would not be arbitrable.

In the scenario where compulsory mediation is implemented for tenancy disputes, parties with a pre-existing arbitration clause in their tenancy agreements would have to endure significant challenges to resolution, such as the arbitration and the mediation – both of which allow either party to delay the filing of the dispute before any Court as they are time-consuming. The arbitrability of the dispute also raises questions such as – if the mediation agreement has been created, but is violated by either party, does that allow the other party to enforce the arbitration agreement in the contract, or would they necessarily have to follow the terms of the mediation agreement itself? Furthermore, the applicability of a mediated settlement agreement as an arbitral award under Sections 30, 73 and 74 of the Indian Arbitration and Conciliation Act (“A&C”) could raise the question of whether a mediated settlement agreement is to be treated as an arbitral award and set aside before arbitration could be pursued. This requires a re-examination of Afcons v. Cherian Varkey and the precedent it set on the enforceability of mediation agreements.

II. Compulsory Mediation in India

The mandatory mediation of tenancy disputes would require specific legislations that would encourage its acceptance, but this is done sparingly in domestic legislation. This is seen in the implementation of Section 12A of the Commercial Courts Act, 2015 (“CCA”) which has little to no data on the efficacy of the legislation making mediation mandatory with an exception for urgent relief. There are also several laws governing mediation in India such as Section 21 of the Legal Services Authorities Act, 1987, Section 12 of the CCA, the Consumer (Protection) Rules, 2020 and the Mediation Bill 2021.

There is also a perception that mediation is a form of surrender to the other party, regardless of the need for it. This perpetuates the notion that the justice gained by it is inferior to the binding nature of litigation despite the enforceability of a mediated settlement agreement. Furthermore, the legal fraternity would also face the apprehension of reduced work due to the dilution of litigation if compulsory mediation is to be implemented. However, mandatory mediation could prevent this by placing the onus of requesting mediation on the Court and not on a specific party, allowing parties to reconcile without worrying about the power differences inherent within a mediation session. However, this does raise the question of whether party autonomy is an inherent part of a mediation session. With the possibility of mandatory mediation, the options allowed through the judgment of Afcons v. Cherian Varkey, such as arbitration, negotiation or a mix of mediation and arbitration would no longer be available to parties that may have preferences for a particular form of ADR. Further, it leads to the disclosure of confidential information that would have been vital in litigation for either party or for restoring the power imbalance between the parties before the mediation session begins, as it is required for parties to enter into the mediation session in good faith.

III. Comparative Analysis with India

The use of mediation in other common law jurisdictions is dependent on the court’s discretion. In Australia, Section 68(1) of the Retail Leases Act, 1994 states that a tenancy dispute is not to be a subject of a proceeding till the Registrar has certified that the mediation has failed, or if the Court is satisfied that mediation would not be able to resolve the dispute. This allows Judges the discretion to decide if mediation is still necessary, making party autonomy a secondary priority despite party autonomy being an essential part of a mediator’s opening statement. Furthermore, as per the precedent in Cathay Developments Pty Limited v. Laser Entertainment Pty Limited, the Court is prevented from exercising its jurisdictional powers (except for orders related to injunctions), until the mediation is complete, allowing either party to impede proceedings.

However, in the United States, the approach to mediation contains a mix of statutes, local rules of the court, federal statutes, and the common law rules of the contract. This framework includes the treatment of a settlement agreement as a “contract”. Federal Rule of Civil Procedure 16 and California’s Fire and Marine Insurance Mediation Code Chapter 8.9 - section 10089.81, also require parties to negotiate in good faith and have the authority to settle claims mandatorily. Being absent at a mediation session or ignoring court orders could lead to a determination of bad faith participation and lead to prosecution. However, the determination of bad faith is done by the court, after a party files a motion to seek sanctions for not entering into the mediation with good faith. This is an example of judicial overreach that allows Courts to interfere in a mediation session despite the confidentiality it needs to offer. However, in India, the use of mediation is voluntary (With the exception of Section 12A of the Commercial Courts Act), and there is no examination on the use of “bad faith” for prosecution since the mediated settlement agreement is treated as an arbitral award, and not as a contract.

IV. Conclusion

The use of mediation as a part of dispute resolution is relatively new in India but has led to the rise of several platforms that advocate for the private resolution of disputes through mediation such as Sama and JustAct, that do not require authorization from the Court under Section 89 of the Civil Procedure Code but have binding mediated settlement agreements that could be treated as an arbitral award. The comparative analysis between other common law jurisdictions and the Indian approach to mediation is similar and requires a uniform legislation – an effort taken by the United States through the Uniform Mediation Act and the Mediation Bill, 2021 in India, both of which are yet to be implemented as law. Borrowing legislation on the enforcement of bad faith, on the other hand, is not only needed but could also encourage parties reluctant to enter a mediation session from exploring it due to the authority of the court.

However, considering the anti-compulsory mediation stance taken by the Parliament, the possibility of compulsory mediation as a reality could diminish, but still allow the fight between party autonomy and court-annexed mediation to continue, preventing weaker parties from equalizing the power between parties in a mediation session.

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