[This article is the third part of a three-part blog series, authored by Balapragatha Moorthy and Shreyas Kafle, fourth year law students at JGLS, Sonipat.]
Keywords: mediation, enforcement, settlement agreement, CPC, judgment, decree, Mediation Council, flexible, voluntary, contract
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 2021, for public comments and consultation. 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. This is the third part of a three-part series analysing the Bill. In Part I, the authors discussed the lackluster way in which the Bill deals with the difference between International Mediation and Domestic Mediation. Part II discussed the issues with mandating the registration of mediated settlement agreements with an authority constituted under the Legal Services Act, 1987. In Part III, the authors will discuss 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.
COMPLICATIONS IN ENFORCING MEDIATED SETTLEMENT AGREEMENTS AS A ‘JUDGMENT OR DECREE’
According to Section 28(2) of the Bill, the mediated settlement agreement shall be enforced in accordance with the provisions of the Code of Civil Procedure, 1908 (“CPC”) in the same manner as if it were a ‘judgment and/ or decree’ passed by a court. This could raise potential challenges as discussed hereinbelow.
According to Section 2(9) of the CPC, a ‘judgment’ means the statement given by the judge on the grounds of a decree or order. Further, according to Section 2(2) of the CPC, a ‘decree’ means the formal expression of an adjudication which, as far as the court giving it is considered, conclusively determines the rights of the parties with regard to all or any of the matters in controversy in the suit. Unlike a mediated settlement agreement between parties, an order or a judgment, to be enforced, must fulfill a high threshold of requirements as per the definition under CPC. Orders and judgments possess their own characteristics and own standards of merit. The process of reasoning by which the Court concludes and decrees the suit must be reflected in the clearly drafted judgment. As per Order 20 Rule 4(2) of the CPC, the ingredients of a judgment need to be a concise statement of the case, the points for determination, the decision thereon, and the reasons for such decision.
There have been many guidelines issued to draft a judgment or a decree, so that it can be uniformly and stringently enforced. However, there are no specific guidelines for drafting a mediated settlement agreement. While ‘reason’ is considered the heartbeat of a judgment, parties don’t have to state their reason for entering the settlement terms in a mediated agreement. Then, can a mediated agreement, which is neither a statement on the grounds of a decree nor a formal expression of an adjudication on the conclusive rights of the parties, be considered pari materia to a judgement or decree? If the mediated agreement contains an ambiguous or an imprecise term, would the court be forced to take up the task of clarifying the settlement terms? If it does, then the benefit of mediation being a ‘party-oriented’ process would be curtailed. If the judge must clarify the terms of the agreement to ensure that certain thresholds of a judgment or decree are met, would they have to conduct a hearing, and would examination of the settlement terms at the stage of enforceability lead to sacrifice of confidentiality?
Apart from this, automatic treatment of mediated settlement agreements as judgment/order reduces the chances of it being enforced in foreign courts of law. According to Article 1(3) of the Singapore Mediation Convention, the Convention does not apply to settlement agreements that are enforceable as a ‘judgment’ in the State of that court. As a result, if cross-border disputes are mediated in India under Part I of the Bill, the parties cannot avail the benefit of worldwide enforceability under the Convention due to its treatment as a judgment or decree as per Section 28 of the Bill. This potential neutralization of the benefits enumerated under the Singapore Convention is a grave concern which calls for an alternative approach in enforcing mediated agreements.
The Alternative Approach:
Alternatively, if mediated agreements were to be enforced as a contract, then the agreement would have to fulfill a lesser threshold requirement as set out under Section 10-23 of the Indian Contract Act, 1872 (“ICA”). Section 10 of the ICA sets out the requirement for an enforceable contract which includes- free consent of parties who are competent to contract, lawful consideration, lawful object, and it shouldn’t be expressly declared as void. Further, if mediated agreement is enforced as a contract, parties have the choice to modify the mediated agreement through an amendment or addendum if they are treated as contract. However, if they are considered as a judgment or decree, it is not clear whether the same option will be available to parties. As Section 2(g) of the ICA notes, a contract is enforceable by law and Section 37 of ICA notes, parties have an obligation to perform the agreement. Therefore, parties don’t gain any additional benefit of enforceability if a mediated agreement is treated as a ‘judgment or decree’, as opposed to a contract.
As mediation is a ‘voluntary’ and ‘consensual’ process, the compliance rates of the mediated settlements far exceed compliance rates of arbitral award or a judicial decree. In most circumstances parties perform the settlement agreement, as they have agreed to the terms out of their own volition by focusing on their needs, rights, and interests. In an event where a party fails to oblige with the mediated settlement, the other party would have recourse through a specific performance action as engrafted under the Specific Relief Act, 1963 and/or Section 73- 75 of ICA which elucidates on the consequences of breach of contract. Therefore, treatment of mediated settlement agreements as contracts for the purpose of enforceability, provides sufficient safeguards and remedies for the parties and it is not necessary to treat them as judgment/decree to avail similar protection.
Mediation Acts of Singapore and Hong Kong, do not have separate chapters on enforceability of mediated settlement agreement. In Singapore, mediated settlement agreements are treated as a contract, unless parties to a private mediation at their choice apply to a court and record their mediated settlement agreement as an ‘order’ of the court as per Section 12, Singapore Mediation Act, 2017. A similar approach is followed in Hong Kong where the settlement agreement is enforceable as a legally binding contractual agreement between the parties and there are no regulations that gives them a special status. Bestowing the parties with a choice to approach the court to treat a settlement agreement as a judgment or decree is preferable than automatically considering them as such. This provides an opportunity to the parties, especially in international mediation, to decide under which territorial jurisdiction they want to enforce the settlement agreement and protects the benefits enumerated under the Singapore Convention.
FLAWS IN COMPOSITION AND FUNCTIONS OF THE MEDIATION COUNCIL OF INDIA
Chapter-7 of the Bill proposes the establishment of an umbrella body called the Mediation Council of India (“Council”), with its head office in Delhi. The establishment of the Council is expected to make the mediation process more disciplined and responsible. To ensure this, the Bill bestows varied powers to the council and expects it to serve several duties and functions. Primarily, the council will endeavor to promote India as a robust Centre for international and domestic mediation. To achieve this aim, the Council can form appropriate policies, guidelines, and regulations for the conduct of mediation. In this part, we will examine the issues in composition of the Council and the function it is expected to carry out.
Imperfections in the composition of the Council:
According to Section 34(2) of the Bill, Appointments under the Council would be made by the Central Government and it constitutes of the following members:
· Chairperson- a person of ability, integrity and standing having adequate knowledge and professional experience or shown capacity in dealing with problems relating to law, alternate dispute resolution, public affairs or administration to be appointed by the Central Government;
· Full-Time Member (1)- a person with knowledge and experience in law related to ADR;
· Full-Time Member (2)- an eminent academician with experience in research and teaching in mediation and ADR;
· Member, ex-officio (1)- Secretary in the Department of Legal Affairs, Ministry of Law and Justice or a representative not below the rank of Joint Secretary.
· Member, ex-officio (2)- Secretary in the Department of Expenditure, Ministry of Finance or a representative not below the rank of Joint Secretary.
· CEO, Member Secretary. Ex-Officio
· Part-Time Member- a representative of a recognized body of commerce and industry.
Interestingly, the draft Bill that was circulated for public comments, required the Chairman of the Council to be a former judge of the Supreme Court or a former Chief Justice of a High Court. Now, that provision has been replaced. Concerningly, the provision requires the Chairman to merely possess ‘adequate’ knowledge and experience in issues relating to ADR, public affairs or administration. It does not require the Chairman to be a dispute resolution professional, a mediator or a legal professional. It is important to keep in mind that the Council is not meant to be a governmental regulatory body which can be handled exclusively by the executives. It must be a self-regulatory body comprising of mediators, with governance and leadership matters being determined by experienced legal professionals as a professional body. Another critical omission in Section 34 of the Bill is not mandating the appointment of a professional mediator as a full-time member or a part-time member. It is significantly essential to appoint a mediation expert as a member to the Council and the Chairman of the Council should be an experienced judge of the High Court or the Supreme Court, which will ensure independence of the body.
While the Council would include one representative of a recognized body of commerce and industry to aid in promoting commercial mediation, similar experts who are necessary to promote non-commercial mediation, like divorce or custody matters, are not part of the Council. The Council should be empowered to co-opt other stakeholders to the body, such as representatives from online dispute resolution institutions. This power of the Council would enable it to formulate appropriate strategies and guidelines to cater to the new trends in mediation. Additionally, the centralization of the council only to the Capital should be reviewed to balance out regional coordination requirements and account for the diverse requirements of various regions.
Possibility of over-regulation by the Council:
According to Section 53(1) of the Bill, the Council could make ‘any’ regulation to carry out the provisions of the Mediation Act. The Council can set out guidelines on manner of registration of mediated settlement agreement under Section 22(7), manner of conducting online mediation under Section 32(2) and the manner of maintaining electronic depository of mediated settlement agreement. It is pertinent to note that mediation is a flexible process and should not be over-regulated. The power to issue various guidelines to regulate multiple aspects of mediation could lead to excessive supervision and make mediation unappealing to parties in conflict. Mediators and mediation service providers have unique ways of conducting mediation, therefore, enforcement of stringent regulations on mediation proceedings would strip the mediators and parties of the choice to adopt varied strategies and approaches to reach a settlement.
Some of the duties of the Council as enumerated under Section 54, including- laying down standards for professional and ethical conduct of mediators; implementing guidelines for the continuous education, certification and assessment of mediators; conducting trainings, workshops and courses in the area of mediation; accreditation for mediators of foreign nationality- would aid in the development of mediation as an effective dispute resolution mechanism. However, the power to lay out rigid rules for conducting the mediation process would severely impede the growth of this mechanism in India. Ironing out these issues in the setting up of the Council would aid in effective development of mediation.
In a nutshell, it can be said that the Bill is indeed a step in the right direction and is equipped with fair shares of constructive provisions which will contribute towards strengthening and promotion of mediation as a viable ADR mechanism. The proposed stand-alone legislation would not only instill greater confidence and faith in the mediation process but would significantly mitigate the issues faced by an over-burdened and over-worked judiciary. However, to truly inspire merit and prudence in mediation, it is imperative to carefully address the various gaps in the Bill, a few of which we have examined in this blog series. If the Bill is passed by the houses in its present form with multiple lacunas, it could end up being interpreted by legal scholars rather being used by disputants.