Mediation: Paving the way to increase the efficiency of the Indian Judicial System

Picture courtesy: https://ncworkercomp.com/mediation-nc-workers-compensation-cases/

THIS ARTICLE WAS WRITTEN BY CHARITHA K.P., A STUDENT OF NALSAR, HYDERABAD.

INTRODUCTION

Indian judiciary is one of the oldest judicial systems in the world. But today, Indian judiciary is failing to work efficiently. Currently, Indian courts have a backlog of 3.3 crore cases.[1] This is a combined result of inefficient judges, hundreds of vacancies, continuous adjournments and increasing approach to courts for disputes which can be solved by other means.

Hence, resort to alternative dispute resolution (ADR) processes is essential to give effective and expeditious relief to the litigants and to abbreviate the pendency in and heavy onus upon the courts. ADR process is known for its less-formal, expeditious and cost effective. But, ADR processes, also known as out of court settlements, are not usually considered as appropriate means of dispute resolution due to their informal and unbinding nature. With an intention to make litigants to resort to ADR processes before the commencement of the trial, the Parliament ushered in Section 89 and Rules I-A to I-C in Order X in the CPC, 1908.[2]

Mediation is a type of alternative dispute resolution which involves negotiation between two parties, facilitated by a neutral third party i.e. mediator to creatively resolve the dispute. It is not an adjudication mechanism but a mere facilitated negotiation. Mediation is a voluntary, collaborative, controlled, confidential and an informed decision-making process.

Laws governing mediation in India:

The Industrial Disputes Act, 1947 was the first act to legally recognise mediation as a valid method of dispute resolution.[3]Under section 4 of the Act, the conciliators appointed are “charged with duty of mediating in and promoting the settlement of Industrial disputes”.[4]The act is majorly focused on resolving disputes in industrial matters and looking at its efficiency over the years,the legislature has enacted several laws to stimulate and invigorate mediation process in India. Some of the important laws are discussed below:

Bolstering the ADR process: The Afcons judgement

Section 89 of Code of Civil Procedure, 1908 was synonymous to ‘Trial Judge’s Nightmare’ before the Supreme court ironed the creases out by passing the Afcons judgement on 26^th July, 2010.[5]Section 89 was added to the Code of Civil Procedure, 1908 through the Code of Civil procedure [Amendment] Act, 1999 which legally introduced the ADR system of dispute resolution, namely arbitration, conciliation, mediation and judicial settlement including settlement through Lok Adalat, to the Civil disputes. According to this section when the court is of the opinion that there exist elements of a consensual settlement between the parties, the court shall draft the terms of settlement and forward it to the parties for their observation and after receiving the observations, the court may reformulate the terms of a probable settlement and refer the same for the above-mentioned ADR system of dispute resolution.[6]The section further defines each process of dispute resolution.[7]

But this section has been criticized for its inherent flaws and impractical procedure. Nonetheless the object behind section 89 is laudable and sound. This section has been held valid irrespective of its imperfections in the case of Salem Bar – (I)[8] and was given a purposive construction to make it workable in Salem Bar (II).[9]The Supreme court in Afcons has furthered the initiative and has resolved the two anomalies in this section through its Afcons judgement. The two significant anomalies are:

1. Section 89(2) of CPC, 1908 defines the four types of ADR process stated in Section 89(1). But the section has mixed up the definition of mediation and judicial settlement. The section defines mediation as “for mediation, the Court shall effect a compromise between the parties and shall follow such procedure as may be prescribed”[10] and judicial settlement as “for judicial settlement, 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”.[11]But the definitions, in their literal sense, do not ascribe the true meaning to mediation and judicial settlement. The court stated that “Judicial settlement”, a concept in vogue in USA, refers to civil case settlement with the aid of a judge who is not conferred adjudicative duties.[12]“Mediation”, on the other hand, refers to a collaborative non-binding dispute resolution with the help of a neutral third party who facilitates dialogue between the two parties to arrive at a consensual settlement.[13]Further, the court accepted that the definitions under the section are contrary to the universally understood meaning which has paved the way to confusion, complication and difficulties in implementation. The court attributed this mistake to be a clerical or typographical error in drafting and if the words were interchanged, i.e. if mediation was inserted in clause (c) instead of “judicial settlement” and if “judicial settlement” was inserted in clause (d) instead of “mediation, then the clauses make perfect sense. Further, the court in Salem Bar-II has adopted a different definition of mediation from that provided in section 89(2)(d). According to the court “Settlement by `mediation’ means the process by which a mediator appointed by parties or by the Court, as the case may be, mediates the dispute between the parties to the suit by the application of the provisions of the Mediation Rules, 2003 in Part II, and in particular, by facilitating discussion between parties directly or by communicating with each other through the mediator, by assisting parties in identifying issues, reducing misunderstandings, clarifying priorities, exploring areas of compromise, generating options in an attempt to solve the dispute and emphasizing that it is the parties’ own responsibility for making decisions which affect them.”[14]
2. Section 89(1) of Code of Civil Procedure, 1908, has been borrowed lock, stock and barrel from section 73(1) of the Arbitration and Conciliation Act, 1996. But the formulation and reformulation of terms in section 73(1) of the Arbitration and Conciliation Act, 1996, occurs in the final stage of conciliation, unlike section 89(1) which requires that the court should formulate and reformulate the terms at the pre-ADR stage. If section 89(1) is to be applied in literal sense, then every Trial judge has to formulate the terms of the settlement and refer it to the parties and in case of any modification reformulate the settlement before referring it to the ADR process. This approach has two major setbacks. First, if the terms of settlement are framed by the Trial judge himself, then there is nothing left to be done by the alternative dispute resolution forum. This hinders the detailed discussion and negotiations between the parties in the alternative dispute resolution forum as they are bound to accept whatever terms the Trial judge drafts and are not at the liberty to formulate their own terms of the settlement, which would completely defeat the purpose of ADR process, especially mediation. Second, the reference to alternative dispute resolution forum is generally made after the preliminary hearing and before the framing of the issues. But section 89(1) requires the court to formulate and reformulate terms of settlement at a preliminary hearing to decide whether a case should be referred to an ADR process and if so, which ADR process, which is not possible. The Judge cannot formulate the terms without detailed discussion with both the parties. Also, when a case is referred to an alternative dispute resolution forum, it is the dispute and not the terms of the settlement that is referred. Therefore, the court in Salem Bar (II) diluted this anomaly by equating “terms of settlement” to a “summary of disputes” and hence the courts are required to formulate summary of disputes and not terms of settlement.

After referring to Salem Bar (I) and Saleem Bar (II), the court in Afconshas said that the above changes made by interpretative process shall remain in force till the legislature corrects the mistake, so that section 89 is not rendered meaningless and infructuous.

Section 442 of the Companies Act, 2013

The Companies Act, 2013 is the act governing incorporation of a company, responsibilities of a company, directors and dissolution of a company. Section 442 of the Act provided for a Mediation and Conciliation Panel. According to this section, the Central Government is to set up and maintain a panel of qualified experts in the field of mediation and conciliation to whom dispute between parties shall be referred during pendency of any proceedings before the Central Government or the Tribunal or the Appellate Tribunal under this Act. Such reference to the panel can be made either at the application or request of the parties or suomotu by the Central Government or the Tribunal or the Appellate Tribunal. Once the matter is referred to the panel, the panel is required to follow the procedure prescribed and dispose of the matter within a period of three months from the date of such reference and forward any recommendations to the Central Government or the Tribunal or the Appellate Tribunal.

Civil Procedure Alternative dispute resolution and mediation rules, 2003.

Mediation procedure in India is mainly governed by Part II of the civil Procedure Alternative dispute resolution and mediation rules, 2013 under the heading ‘Civil procedure mediation rules’. It provides for Appointment of Mediator, Panel of Mediators, Qualification of persons to be empanelled, Disqualifications of persons, Venue for conducting Mediation, Duty of Mediator, Procedure of mediation, role of the mediator, fee of mediator and costs, Ethics to be followed, etc. The Act provides for a Panel of mediators,which includes retired Judges, Experts and institutions in this area or legal practitioners with at least 15 years’ standing at the Bar, to be appointed by the High Court[15] and the parties are either to select a mediator from the panel or appoint anyone unless he is disqualified under Rule 5. [16]The venue for mediation can either be decided by the parties themselves or by district judge or the Bar Association or the venue for Lok Adalat. The mediator has a duty to inform, in writing, about any conflict of interest, if any, that exists in the case he has been referred and if there is a justifiable doubt about the mediator’s impartiality, the appointment shall be cancelled. Rule 11 lays down in detail the procedure to be followed when the parties have not specified any procedure. Further, the mediator is not bound by Evidence Act, 1987 or Code of Civil Procedure, 1908. Rule 18 of the Act provides that on the expiry of sixty days from the date fixed from the first appointment, unless the court or the mediator or the parties are of the view that extension of time is necessary. The Act further provides for privacy, immunity, communication, confidentiality, good faith and settlement.

POSITION OF MEDIATION IN THE INDIAN CONTEXT

Is the reference to ADR process mandatory?

Section 89 of CPC starts with “where it appears to the court that there exist elements of settlement..”. This means that the court has to form an opinion as to whether the case is suited to be referred to ADR process. According to Rule 1A of Order 10 of the Code, the court has to invariably refer cases to ADR process. But if the case is not appropriate to be referred to ADR, then the court has to record reasons for not referring the case to ADR and continue with the normal proceedings. Hence, it is mandatory for the court to consider recourse to ADR after having a hearing after completion of pleadings, and not actually referring the case to ADR. The court in Afcons has laid down some category cases that are generally not suitable for ADR process like disputes relating to election to public offices, disputes involving grave and specific allegations of fraud, coercion, forgery, impersonation, etc, cases requiring protection of courts like minors, mentally challenged, etc, cases involving prosecution for criminal offences, cases involving public interest or interest of numerous persons who are not parties before the court and cases involving grant of authority by the court after enquiry. The court has also enlisted cases which are suited for ADR like disputes arising out of contracts which includes specific performance, disputes between builders and customer, disputes between bankers and customers, dispute between insurer and insured, etc, disputes arsing out of strained relationships which includes matrimonial cases, partition disputes, partnership disputes, etc, disputes which involve need for continuation of the existing relationship like disputes between neighbours, disputes between employer and employee, etc, all disputes arising out of tortious liability which includes consume disputes, compensation in motor accidents, etc. The above-mentioned cases are not exhaustive and are to be judged based on facts and nature of the case.

Qualified mediators: the need of the hour

CONCLUSION

The best factor of mediation is that the parties are the liberty to tailor their dispute into creative solutions. But even with such a huge positive aspect, mediation is still not the preferred mode of dispute resolution because of various factors. One major aspect is that the parties are not aware of this facility. Hence, it is the duty of the legal advisor to inform them of this choice. Parties also not prefer this process due to deficiency of qualified mediators. As suggested above, one way to address this problem is to involve private institutions for mediation. Yet, even today people see court to be the best mode of getting justice as it is state owned, open and under the scrutiny of the public. However, not all disputes are fir for court proceedings. Some disputes which are very private and complex in nature are better solved by mediation. Our country has taken baby steps in this regard. One such act is the Commercial Courts, Commercial Division and commercial Appellate Division of High Court (Amendment) Ordinance of 2018 which has made pre-institution of mediator mandatory before filing of any commercial disputes.

[1]Harish V Nair, ‘3.3 crore backlog cases in courts, pendency figure at highest: CJI Dipak Misra’, India Today, available at: https://www.indiatoday.in/india/story/3-3-crore-backlog-cases-in-courts-pendency-figure-at-highest-cji-dipak-misra-1271752-2018-06-28

[2]Afcons Infrastructure Ltd. v. Cherian Varkey Construction Company Pvt. Ltd, (2010) 8 SCC 24, Para 7.

[3]Akanksha Mathur, “How does the mediation process work – Steps and procedure”,iPleaders,available at: https://blog.ipleaders.in/mediation-in-india-process/

[4]Ajay Thakur, “What every Indian Should know about mediation”,iPleaders,  available at:  https://blog.ipleaders.in/indian-should-know-about-mediation/

[5]Supra note 2

[6] Section 89(1), CPC, 1908

[7] Section 89(2), CPC, 1908

[8]Salem Advocate Bar Association v Union of India (Salem Bar (I)), 2003 (1) SCC 49.

[9]Salem Advocate Bar Association v Union of India (Salem Bar (II)), 2005 (6) SCC 344.

[10] Section 89(2)(d), CPC, 1908

[11] Section 89(2)(c), CPC, 1908

[12]Supra note 2, Para 8

[13]Ibid

[14]Supra note 9

[15] Rule 3, Part II, the Civil Procedure Alternative dispute resolution and mediation rules, 2003

[16] Rule 2(c), Part II, the Civil Procedure Alternative dispute resolution and mediation rules, 2003

[17] Rule 7 (a), Part II, the Civil Procedure Alternative dispute resolution and mediation rules, 2003

[18] Rule 7 (b)(i), Part II, the Civil Procedure Alternative dispute resolution and mediation rules, 2003

[19] Rule 7 (c), Part II, the Civil Procedure Alternative dispute resolution and mediation rules, 2003