Alternative Dispute Resolution (ADR) has been an effective complementary mechanism to resolve disputes. It has secured more popularity over the decade.
ADR offers a set of methods and techniques which enables amicable settlement, without judicial interference. The techniques of ADR vary from region to region and depend on the legal framework of a country. Among various methods of ADR, mediation is effective and thus gaining popularity as a preferred mechanism even among corporates.
Both, the government and the judiciary have consistently proposed mediation as an alternate dispute resolution mechanism. The Supreme Court, in the cases discussed below, has affirmed the provisions of mediation and conflict resolution.
Legislations like Industrial Disputes Act 1947, Consumer Protection Act 2019, and Companies Mediation Rules 2016 have incorporated provisions on mediation as a mode for an amicable solution to disputes. Amendments to Industrial Disputes Act, 1947 under Section 10A provides for amicable settlement of disputes through arbitration mechanism. A unified and consolidated legislation in this direction would have hastened the development and reliability of ADRs, which is still missing.
LEGISLATIVE HISTORY
The concept of mediation was first introduced through the amendment of Section 89(2)(d) of the Code of Civil Procedure 1908 (CPC), which empowered courts to direct settlement by mediation over other mechanisms. This provision requires the mediator to report to the court if a requisite settlement has been reached between the parties and the court passes a decree in accordance with the terms of the settlement. This amendment to CPC, promoting mediation, was challenged in the landmark case of Salem Advocates Bar Association v. Union of India, 2003, which led to the formation of Law Commission overviewing the effectiveness of mediation as means of fast resolution to pending cases.
Mediation is non-binding upon the parties and is a voluntary mode, this has increased the participation and inclination even by corporates. Mediation has moved from settling typical family disagreements to mediating more on corporate commercial disputes. Enforcing a mediation order requires the settlement to be recorded in the form of a consent decree before a court. Section 36 of the Arbitration and Conciliation Act, 1996 states that the arbitral tribunal does not have the requisite power to execute the arbitral award itself. Therefore, the arbitral award has to be enforced under provisions laid down in the CPC in the same manner as a decree of the court.
If a settlement is not reached, then litigation commences. To reduce the litigation burden, Civil Procedure Alternative Dispute Resolution and Mediation Rules, 2003 were framed.
Afcon Infrastructure Ltd v. Cherian Varkey Construction Co. Ltd, 2010 held that all disputes related to trade, commerce, and contracts should be mediated, a step forward in ADR. Controversial commercial disputes like Ambani brother’s takeover of the South African telecom MTN were also directed towards mediation. Amendments to the Commercial Courts Act, 2015 made mediation mandatory before the institution of suits. Therefore, the settlement reached during the pre-institution mediation process is considered binding and has the same effect of an arbitral award under sub-section (4) of Section 30 of the Arbitration and Conciliation Act 1996. The total time spent during the mediation process in pre-instituted mediation (PIM) is excluded for the purpose of mediation. The Commercial Courts (Pre-Institution Mediation and Settlement Rules) 2018 (PIMS) have provided a detailed procedure to pre institution mediation. PIM remains optional to parties according to PIMS Rules 2018.
However, in India, most PIM in commercial matters do not receive the necessary gravity as interim relief is considered urgent and instead of going into mediation, involved parties have to file suits to seek interim relief.
MEDIATION IN BUSINESS
Mediation is typically spoken of as a mechanism that is resorted to at a stage immediately preceding litigation, or after litigation has commenced.
Mediation, in fact, should be viewed as more than a tool for dispute resolution but as a tool for conflict management and mitigation.
It is this version of mediation that businesses could cultivate in areas like:
- Workplace disputes-
- claims of infringement of employees’ rights
- unequal treatment/ discrimination claims
- claims of employees breaching contractual terms
- breakdown in a working relationship
- issues arising from a grievance and disciplinary procedure (particularly before a matter becomes a disciplinary issue), etc.
Effective utilization of mediation within organizations can result in better management of conflict and provide effective resolutions to operations and management issues.
- Payment and other contractual disputes- Payment and contractual disputes, with vendors, suppliers, and customers/ clients, which form the bedrock for any business could benefit from mediation and help in preserving the long-term business relationship with them.
PRACTICAL IMPLEMENTATION OF MEDIATION BY BUSINESSES
- Including mandatory mediation clauses in standard vendor contracts and employment contracts.
- Develop mediation-arbitration clauses for the appointment of a mediator.
- In event of an impasse of lack of satisfactory resolution, the next stage can be arbitration.
- A qualified mediator could move on to be the arbitrator and render a binding decision quickly. The matter could also be assigned to an arbitrator with the consultation of a mediator.
- Mediation can also be included as part of an establishment’s internal grievance or dispute resolution procedure. This early intervention for conflict management can form a part of the core corporate governance principle for a business. Engaging ad-hoc trained mediators could be a means of upscaling for an organization. Mediation can also be marked as a comeback option at any stage of dispute resolution.
ONLINE DISPUTE RESOLUTION
Closure of courts during lockdowns presented a unique challenge for the country in demonstrating its preparedness in online dispute resolution. The courts made a quick transition in infrastructure and mindsets. Insufficient data security legislation has emerged as a significant drawback in the growth of online dispute resolution and effective adoption of this at all levels.
Nevertheless, Business to Business(B2B) or Business to Consumer(B2C) disputes adopted quickly which reduced the potential negative impact to businesses by keeping the cart moving. Disputes were resolved despite geographical constraints, saving time compared to traditional litigation and in times of economic constraints, it has been cost-effective.
CONCLUSION
Mediation can emerge as a very efficient mechanism in dispute resolution and conflict management, right from early stages in a business, retain operational fluidity and reduce loss of resources in protracted litigation.
With the adoption of digitization and some support from legislators in framing strong digital laws, ADR can be a scalable and effective model which can keep pace with the demands of businesses that have increasingly relied on technology.
This is only for informational purposes. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein.
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