Pre-Suit Mandatory Mediation

Raman Sharma, Advocate

Date : 1/04/2019

Pre-Suit Mandatory Mediation

India, a developing country, has made substantial progress in the areas of providing health, education and other necessities of life to its citizen. There is phenomenal increase of professionals, entrepreneurs and businessmen. Every individual is working hard to become financially independent. There is growth in financial resources of people, their consciousness about their rights and will to enforce such rights has increased. The commerce has grown tremendously which is now a universal phenomena. Technology affects the pattern of working of people. There is ever growing need of new legislations to regulate new emerging situations. Similarly, there is ever existing need to update the existing laws to meet the new emerging situations. Those who do not match this changing scenario are bound to mis-match and faulter. The government machinery is required to be responsive to the needs of a conscious society which invariably lags behind. Whenever there is infraction of rights of people at the hands of others, invariably at the hands of Government or its agencies, it gives rise to litigation.

Past trends have shown that litigation is ever growing. The number of cases filed in courts are increasing year by year despite best efforts being made by the Courts and by the Governments to ensure that litigation is curtailed. Data available on website of Punjab & Harayana High Court showing year-wise institution, disposal and increase in pendency of cases can be quoted as an example :


Opening Balance







































Picture of other States is no good. In June, 2018 the Chief Justice of India had sounded the alarm on rising pendency considering the problem of backlog of cases touching 3.3 crore cases. While 2.84 crore cases were pending in the subordinate courts, the backlog clogging the High Courts and Supreme Court was 43 lacs and 57,987 cases, respectively. According to National Judicial Data Grid, the five States which account for the highest pendency were Uttar Pradesh (61.58 lacs), Maharashtra (33.22 lacs), West Bengal (17.59 lacs), Bihar (16.58 lacs) and Gujarat (16.45 lacs). There were large number of under-trials languishing in jails across the country as they do not get bail and many of them spend more than their sentence once they are convicted. Of all the pending cases, 60% are more than two years old, while 40% are more than five year old. In the Supreme Court, more than 30% of pending cases are more than five years old. In the Allahabad High Court, 15% of the appeals have been pending since 1980s, while in the MP High Court, 70,000 are pending since 1994. Therefore, overall picture is very grim.

The above figures reveal that invariably there has been consistent higher institution of cases year after year. There has also been great effort at disposal of cases but the disposal has not matched the institution and finally the pendency has grown. If the present dispensation is not able to dispose of the number of cases that are filed every year despite the fact that every court is over-worked with ever growing cause lists, courts function beyond their time schedules, hence, some extra-ordinary steps need to be taken.

The judiciary has adopted multi-pronged strategies to handle the litigation. There is lot of emphasis on Alternate Dispute Resolution (ADR). The government has introduced amendments in Arbitration & Conciliation Act, 1996 to ensure that wherever there is an agreement between the parties to get the disputes resolved through arbitration, such disputes should get resolved at a faster pace but lot more needs to be done in this regard. After an award is passed, a statutory right to file objections is available. Objections are maintainable before principle court of original Civil Jurisdiction i.e. the District Judge. Thus upon case being decided by arbitrator, the litigation enters mainstream of court process at Divisional Level. This mechanism is helping only at first stage decision.

Mediation is also being resorted to extensively for which mediation cells have been set up in almost all the courts. Through this process, a team of trained mediators is available and the disputes can be got resolved by the people through this mode. It is a job of an independent Mediator to sensitise the disputing parties about the strengths and weaknesses of their dispute. The parties are required to be told that if left to be decided through court process there is inherent risk of relief being granted, about the delays which are bound to occur and about the right available with a losing party to approach higher courts and by convincing the parties a permanent quietus to a lis can be given. Quite a substantial number of cases are getting resolved through mediation process. Having felt necessity of pre-litigation mediation, Mediation & Conciliation Committee of Punjab & Haryana High Court in October, 2014, launched the concept of Pre-litigation Mediation on the same lines as was being followed by Delhi High Court Mediation Centre. Under this concept of Mediation, a party has the option to make an application to the Mediation Cell by paying a nominal fee of Rs.10,000/- for seeking mediation in a dispute and in case matter gets settled, such settlement is at par with an award rendered in arbitral proceedings in terms of section 74 of Arbitration and Conciliation Act, 1996. So even if there is no arbitration agreement, still a party can opt for resolution of dispute by Pre-litigation Mediation mechanism. A wide publicity in this regard is being made so that public is made conscious of this mode of settlement of disputes. This system needs to be widened and strengthened so that litigation burden on regular courts could be drastically reduced.

The Central Government has also recognized the need of having adequate mechanism to settle the disputes at pre-mediation stage itself. A very important amendment came about in the Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2018. Section 12-A in Chapter III-A on Pre-Institution Mediation And Settlement which is a step in right direction, is to the following effect:-

"12A. (1) A suit, which does not contemplate any urgent interim relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government.

(2) The Central Government may, by notification, authorise the Authorities constituted under the Legal Services Authorities Act, 1987, for the purposes of pre-institution mediation.

(3) Notwithstanding anything contained in the Legal Services Authorities Act, 1987, the Authority authorised by the Central Government under sub-section (2) shall complete the process of mediation within a period of three months from the date of application made by the plaintiff under sub-section (1)

Provided that the period of mediation may be extended for a further period of two months with the consent of the parties

Provided further that, the period during which the parties remained occupied with the pre-institution mediation, such period shall not be computed for the purpose of limitation under the Limitation Act, 1963.

(4) If the parties to the commercial dispute arrive at a settlement, the same shall be reduced into writing and shall be signed by the parties to the dispute and the mediator.

(5) The settlement arrived at under this section shall have the same status and effect as if it is an arbitral award on agreed terms under sub-section (4) of section 30 of the Arbitration and Conciliation Act, 1996."

This legislation is certainly going to cause big dent on the litigation of a category covered under the provisions of Commercial Courts Act. This concept needs to be introduced to all the category of cases being filed in regular courts, of course with exception qua few identified category of cases.

Similar provisions exist in The Micro, Small and Medium Enterprises (MSME) Development Act, 2006 which mandate conciliation when disputes arise on payments to MSMEs. Its only when mandatory conciliation fails that the disputes are referred for statutory arbitration. Section 18 of the 2006 Act is reproduced as under:-

"18. Reference to Micro and Small Enterprises Facilitation Council.

(1) Notwithstanding anything contained in any other law for the time being in force, any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.

(2) On receipt of a reference under sub-section (1), the Council shall either itself conduct conciliation in the matter or seek the assistance of any institution or centre providing alternate dispute resolution services by making a reference to such an institution or centre, for conducting conciliation and the provisions of sections 65 to 81 of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall apply to such a dispute as if the conciliation was initiated under Part III of that Act.

(3) Where the conciliation initiated under sub-section (2) is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternate dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996 (26 of 1996) shall then apply to the disputes as if the arbitration was in pursuance of an arbitration agreement referred to in sub-section (1) of section 7 of that Act.

(4) Notwithstanding anything contained in any other law for the time being in force, the Micro and Small Enterprises Facilitation Council or the centre providing alternate dispute resolution services shall have jurisdiction to act as an Arbitrator or Conciliator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.

(5) Every reference made under this section shall be decided within a period of ninety days from the date of making such a reference."

This measure of mandatory pre-litigation conciliation by the Micro and Small Enterprises Facilitation Council. has gone a long way in protecting the interest of Micro Small and Medium Enterprises and their disputes are getting resolved expeditiously.

For carrying out pre-litigation mandatory mediation there may be necessity of involving experts. During the hearing, there may be necessity of calling oral/documentary evidence from different departments and necessity of having expert opinions may be required with a focus on resolution of dispute. The type of cases that can be easily handled may be those involving insurance, employment, business and other civil disputes. The process of mediation saves both money and time. Pre-litigation would provide quicker resolution to a dispute. The time thus saved on handing new emerging litigation can be utilized by the courts on deciding old pending cases and the litigation which flows in regular courts. Otherwise there does not seem to be any possible solution to the problem of deciding pending cases. Option must also be given to those litigants whose cases are pending for years together and there is hardly any likelihood of those cases being taken up by the courts for decision to make an effort at mediation by getting the cases referred to Mediation. Some incentive to Bar would work miracles.

A statutory duty must be case on the Advocates to apprise the potential litigant that mediation is a process adopted to arrive at amicable resolution of dispute. The parties themselves or through Advocates must spell out their dispute in detail to the other side with corroborative evidence. In case provision is in place to ensure fixed professional fee to the Advocates handling matters at pre-litigation stage, surely the majority of disputes would get resolved at this stage itself. Many issues can be settled through this process even if the mediation did not result in a final decision and the left out issues can be got settled through the court process. This exercise carried out at pre-litigation stage would still assist the Court in a big way inasmuch as the material collected through mediation process can be made basis and be made admissible in evidence in evidence before court of law and the court may proceed to adjudicate only the left out issues of fact and law which were left unresolved through mandatory pre-litigation exercise.

By way of pre-litigation mediation, a potential litigant is required to be provided with an option and opportunity to have a formal process involving several steps to be taken prior to litigation. Necessary amendments can be introduced to various statutes, as has been done by the Central Govt. under Commercial Courts Act and MSME Act, discussed above. Such provisions made in the land laws will go a long way in resolving various boundary related issues. It should be made a mandatory condition for every litigant to have the dispute raised through Advocate by giving out complete detail of the dispute, supporting evidence and the settled legal position on the issue. Such a notice should be examined by the opposite party and its Advocate and a mandatory response must transact in this regard between the parties. The area how Advocates would conduct the matter can also be specified and regulated. It can be made a statutory duty of the Advocates representing respective parties to certify the actual dispute on facts and on law. It is only thereafter that consensus report of both the Advocates on the gist of dispute on facts and law alongwith documentary evidence should be placed before a "Designated Authority" may be under the Legal Services Authority Act and/or before the Mediators who may make their best efforts to get the dispute resolved obviating necessity of approaching the Court. When all efforts at settlement fail only then the dispute must enter the Court process. Law needs to be amended and made harsher that in case a party ultimately is found to have acted unreasonably and with dishonesty in not settling the dispute through mandatory pre-litigation stage mechanism and fails in court, must be burdened with exemplary consequences.

It would be apt to discuss the litigation policy adopted by Italian Government. In 2014 The Italian government enacted a Decree (later to converted into Law) laying down urgent measures to reform the Italian civil judicial system and to deal with the backlog of pending cases. According to the Decree's explanatory report, it was necessary and critical for Italy to reduce the duration of Italian court proceedings in order to put an end to its violations of the "reasonable time" requirement for a fair trial set forth in Article 6(1) of the European Convention on Human Rights. Moreover, the government aims to transform the Italian justice system from a burden on the country's growth to a driving force to assist in resolving the nation's economic crisis. The new measures were designed to reduce the workload of Italian courts by diminishing the average time required to obtain a decision in civil cases. This would make Italy a more attractive country for foreign investment and work toward the ultimate goal of accelerating economic growth. The Decree was also inspired by a decision to leverage the professional capabilities and skills of Italian lawyers in the judicial system. The main changes introduced by the Decree included:

• The possibility to refer pending cases to arbitration conducted by panels comprising lawyers who have been members of the relevant Italian bar for more than three years (Articles 1 and 9);

• The introduction of the so-called "settlement negotiation assisted by legal counsel" or "assisted negotiation" as an out-of-court means to resolve disputes, which would become a mandatory prelitigation step for disputes pertaining to certain specific matters (Articles 2-5);

• The possibility to interrupt statute of limitations by inviting the counterparty to proceed with assisted negotiation (Article 8);

• A reduction in the number of cases in which the judge may order that each party bear its own costs, thereby discouraging potential losing parties from bringing proceedings as a dilatory tactic (Article 13);

• The possibility to convert ordinary proceedings into summary proceedings to accelerate the taking-of-evidence phase (Article 14);

• The introduction of written affidavits to accelerate the hearing-of-witnesses phase (Article 15);

• Reductions in the periods during which Italian courts are closed in summer, judicial deadlines and hearings are suspended, and judges take holiday leave (Article 16);

• An increase in the interest rate applicable to pending legal proceedings to limit the use of vexatious litigation by debtors as a means of delaying payments (Article 17); and

• Measures directed to simplify enforcement proceedings and make them more effective (Article 18-20).

Mediation policies in some of the countries, like Italy, mandate mediations through various mechanisms, which is working well and is highly successful.

In India also there is a dire need for a comprehensive policy on pre-litigation mediation rather than selective, half-hearted and disconnected steps making no big difference. The role and professional responsibilities of Advocates, Mediators and other Experts with consequential responsibility of Government as a major litigant, the rights and obligations of parties in the process, and the outcome of the mediation agreement need to be well defined to get desired result. It has to be a collective action by Legislature, Executive and Judiciary that this monster of pendency of cases can be managed. It is not possible only for the ill-equipped Judiciary to handle this alarming situation.

© Chawla Publications (P) Ltd.