[This article is the second part of a three-part blog series, authored by Balapragatha Moorthy and Shreyas Kafle, fourth year law students at JGLS, Sonipat.]
Keywords: mandatory registration, mediation bill, settlement agreement, court intervention
As a milestone to the efforts to strengthen mediation as a viable ADR mechanism in India, the Ministry of Law and Justice released a Draft Mediation Bill, 2021 on 5th November 2021for public comments and consultation and the Mediation Bill, 2021 (Bill No. XLIII of 2021) (“the Bill”) was introduced in Rajya Sabha on 20th December 2021. Currently, the proposed law is before the Parliamentary Standing Committee on Law and Justice. The Bill takes up many objectives including promotion, encouragement and facilitation of mediation, enforcement of domestic and international mediation settlement agreements and endorsing online mediation as an acceptable and cost-effective process. The power of mediation certainly needs to be harnessed, and this Bill will provide fertile soil for its growth.
However, the Bill falls short on multiple counts and in this blog series the authors will examine four significant shortcomings of the Bill. Part I discussed the lackluster way in which the Bill deals with the difference between International Mediation and Domestic Mediation. In Part II, the authors will discuss the issues with mandating the registration of mediated settlement agreements with an authority constituted under the Legal Services Act, 1987. In Part III, the complications in enforcing the final mediated settlement agreement as a ‘judgment or order’ of the court and the issues with the proposed Mediation Council of India will be discussed.
A DAUNTING PROPOSAL FOR MANDATORY REGISTRATION OF MEDIATED AGREEMENTS
Section 22(7) of the Bill provides that the mediated settlement agreement arrived at between the parties “shall be” registered under the Legal Services Act, 1987, and the authorities would issue a registration number unique to the settlement. According to the Bill, the mandatory registration of the mediated agreements is ‘for the purpose of record’ by the authorities. The mandatory registration will not be required for settlements arrived in a court or tribunal referred mediation or award of Lok Adalat or final award of Permanent Lok Adalat under section 21 or section 22E of the Legal Services Authorities Act, 1987. The proviso to the section states that ‘registration shall not be mandatory (emphasis supplied) till the time regulations under this sub-section are made’. This makes it evident that Section 22(7) is a ‘mandatory’ provision and once the relevant rules are enacted, parties would have to compulsorily register their settlement agreements.
To start with, it is important to understand the general intent of lawmakers in mandating registration of any agreement. Usually, agreements concerning the transfer of immovable property, or certain loan agreements which involve creation of mortgages or hypothecation, need to be registered as they involve transfer of rights from one person to another. The registration of documents in these cases is necessary to ensure that the transferee gains a clear right and title over the property as it would legally define ownership rights. Then the question arises, should the legislature give the same weight to a mediated agreement that merely contains the negotiated terms between the parties? A recurring theme in the Bill is a tendency to make the mediation process more formal than it ought to be. The Arbitration and Conciliation Act’s shadow looms over the Bill and the drafters seem to have missed the understanding that mediation is a less formal process than arbitration and requires negligible intervention by law.
While section 21(7) of the Bill makes it mandatory to register settlement agreement, it does not enumerate the consequences of non-registration. If non-registration affects the enforceability of the settlement, the efforts of the parties in reaching a final resolution would become redundant. It would also mean that actions taken by parties pursuant to such resolution will have to be reversed and at the end, it would result in disenchantment with the mediation process. Obviously, this consequence could not be the intention of the lawmakers. The requirements to be met for lawful enforceability of a mediated settlement agreement is provided under Section 29 of the Bill. Therefore, an additional requirement of registering the mediated agreement has nothing to do with enforceability of the settlement.
Further, it is deeply disconcerting that the drafters of the Bill are willing to forego one of the cornerstones of mediation i.e., ‘confidentiality’, for the purpose of ‘record keeping’. There is a psycho-emotional benefit in parties acknowledging and accepting that any discussions during the mediation would remain ‘in the room’. It aids the parties to truly feel free to express themselves, to effectively communicate, and to collaboratively brainstorm solutions and problem-solving. Therefore, in most circumstances, parties intend to keep the settlement confidential, and a confidentiality/non-discourse clause is a common feature in most mediated agreements. The mandatory registration would frustrate the intention of the parties to keep the settlement confidential.
Additionally, Section 22(9) of the Bill provides that even the mediator or mediation service provider can register the mediated agreement. This could impact the perception of neutrality of the mediator, especially when parties are reluctant to register the settlement agreement. Additionally, registration would prove to be an onerous process for the disputants given the commonly prevalent red tape in bureaucratic institutions, which could delay enforcement of the settlement. This would disincentivize parties from engaging in mediation.
The Possible Alternative:
Some experts have argued that the registration of the mediated settlement agreement should be made optional at the choice of parties[i]. According to the authors, the requirement should be completely done away with. An optional registration could create a perception among the parties that a registered settlement has an additional enforceability quality than an unregistered settlement. This could ultimately force the parties to sacrifice their need for confidentiality. It also leaves scope for courts to interpret registered and unregistered settlements differently in the future. As the drafters have not put forth any benefit in mandating the registration of the mediated agreements, other than that it aids in record keeping functions of the authorities, this perplexing requirement should be removed.
If any settlement consists of a performance that would require mandatory registration, parties will have to fulfill the process according to the relevant statute. For example, if the mediation dealt with a divorce matter, and one of the parties agrees to transfer an immovable property as a settlement, then the transfer would require registration under the Transfer of Property Act. However, this has nothing to do with the registration status of the mediated settlement. The Indian Contract Act and principles of Contract Law are sufficient to enforce the mediated settlement agreement, and this is the practice that has been adopted by jurisdictions like Hong Kong and Singapore. India should move away from incorporating concepts of Arbitration and fully embrace mediation in its truest sense.
A discussion on the complications in enforcing the final mediated settlement agreement as a ‘judgment or order’ of the court and the issues with the proposed Mediation Council of India, can be found in the third and final part of this blog series.
[i] Comments submitted by CAMP Arbitration and Mediation Practice Private Limited and Comments submitted by Chitra Narayan, Lawyer and Mediator.