Mediation - The Rise Of Commercial Mediation In India
Author: LawSphereX
Category: Arbitration & ADR
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MEDIATION: THE RISE OF COMMERCIAL MEDIATION IN
INDIA Pallavi Raj, Amity University Noida Commercial mediation involves resolving business disputes outside of court, where a neutral mediator assists the parties to reach a mutually agreeable resolution. Mediation has always been an informal and ad hoc process. Lack of standardization and varying approaches followed by different mediators tend to have a significant impact on the outcome of the mediation process. India has seen a significant rise in the use of commercial mediation. Statistics indicate a substantial increase in the number of cases resolved through mediation, reflecting a growing trust in this process. According to data presented by the law minister in August 2023 to Lok Sabha pertaining to Mediation Centres operating under the National Legal Services Authority (NALSA), mediation in India has witnessed significant expansion in recent years.
The number of cases submitted for mediation has steadily increased each year since 2018. The financial year 2022-23 had 4,12,990 cases, the highest number, brought for mediation, out of which 92,446 cases were successfully resolved. India has long embraced the principle of mediation, from ancient times to the modern era. Legislators and jurists have consistently promoted mediation, but the process has historically lacked formal codification. To address this, the Indian Parliament enacted the Mediation Act 2023, aiming to formalize and enhance the mediation process. Codification was crucial, as the informal nature of previous mediation efforts often led to their failure.
As the number of cases submitted to mediation has been rising over the last six years, the formal codification of this process has significantly increased public trust in choosing mediation as an option to resolve commercial disputes. The main provisions of the Mediation Act, 2023, include voluntary pre-litigation mediation for civil and commercial disputes, requiring parties to attempt mediation before approaching a court or tribunal. This process must be completed within a maximum of 180 days. This legislative framework supports the rise in commercial mediation by offering a time-efficient resolution method.
In lieu of this, the Ministry of Finance Department of Expenditure issued a recent office memorandum with the aim of encouraging mediation to settle the disputes arising out of the contracts signed between the government agencies and the private sector. As per the said office memorandum the department of expenditure has directed the government departments and the public sector undertakings to settle the disputes arriving out of private procurement contracts by the way of mediation proceedings in accordance with the rules laid down by the mediation Act 2023. The said office memorandum aims to make sure that the above mentioned disputes are settled in a cost effective and timely manner. In the said office memorandum the department of expenditure has also suggested the government agencies to set up a high level committee to facilitate the said mediation proceedings.
The said directions are indicative of the intentions of the government of India to promote mediation proceedings. According to success stories from Effective Dispute Solutions Limited, a UK-based firm, many commercial cases that initially went to litigation took four years and incurred significant costs for both parties. However, these cases were subsequently resolved through mediation in just one day. This highlights that mediation is a highly effective and efficient method for resolving commercial disputes. In India, where courts are already overburdened with cases, litigation often consumes excessive time and money. By opting for mediation, companies can resolve disputes more swiftly and cost-effectively. This not only alleviates the strain on the judicial system but also allows businesses to redirect their resources toward various other profitgenerating activities.
Now in 2025, with the Mediation Act 2023 providing a legal framework for mediation, the trust in commercial mediation is increasing significantly. The mediation act reinforces the critical principles of mediation, including confidentiality, self-determination, and voluntariness. This legislative support is leading to a rise in the use of mediation for commercial disputes, further demonstrating its effectiveness as a preferred method for conflict resolution in the business world. MEDIATION ACT, 2023 The Mediation Act, 2023 introduces key sections to strengthen commercial mediation and make it a more effective method for resolving disputes. Section 20 of the Mediation Act, 2023 allows mediated settlement agreements to be formally recorded and registered with a recognized authority, enhancing their traceability and enforceability.
This ensures that parties have a concrete and accessible record of their agreements, adding legitimacy to the mediation process. Section 27 of the Mediation Act, 2023 states that once a mediated settlement agreement is signed and authenticated by the mediator, it is final, binding, and enforceable as a court judgment or decree. This provision gives mediated settlements strong legal standing, ensuring that parties adhere to the agreed terms and providing them with the same weight as judicial decisions under the Code of Civil Procedure, 1908. Section 28 of the Mediation Act, 2023 outlines the grounds and procedures for challenging mediated settlement agreements, such as fraud, corruption, or impersonation, and provides a 90-day window to file challenges. This ensures the integrity and fairness of the mediation process by allowing judicial oversight in cases of misconduct or error.
These provisions make the Mediation Act, 2023 a powerful tool for resolving commercial disputes in India. By offering a structured, reliable, and enforceable framework, the Act enhances trust in mediation and promotes it as an efficient alternative to traditional litigation. JUDICIAL SUPPORT The judiciary plays a significant role in promoting commercial mediation in India. Courts have the authority to refer cases to mediation when they believe the disputes can be effectively resolved outside the traditional litigation process. This judicial support is evident in the case of Usharani C. Reddy v. Venkatadasarigari Ramanjaneya Reddy 2024 SCC OnLine SC 1030 In this case, the Supreme Court referred the matter to the Supreme Court Mediation Centre to mediate the issues and facilitate a settlement between the parties.
The mediation process proved successful, with a Settlement Agreement being reached that satisfied all parties involved. This outcome not only resolved the dispute in less time but also minimized the costs and resources that would have otherwise been expended on prolonged litigation. This example demonstrates the judiciary's proactive approach in endorsing mediation as an effective alternative dispute resolution mechanism. By referring suitable cases to mediation, courts help alleviate the burden on the judicial system while promoting quicker and more amicable resolutions for commercial disputes. This judicial endorsement is crucial in increasing the adoption and success of commercial mediation in India.
Expanding Horizons With legislative, institutional, and judicial support, the rise of commercial mediation in India is set to transform dispute resolution. Mediation offers a cost-effective and time-efficient alternative to litigation, allowing businesses to save valuable resources. These resources can then be redirected towards productive, profit-making activities, enhancing overall business efficiency and growth. Mediation thus emerges as a strategic choice for resolving commercial disputes in 2024 and beyond.