Mediation is yet to become the preferred choice for corporate dispute resolution, but perspectives are changing
A Bollywood celebrity checked into one of the popular spa chains in the airport for a shoulder massage. In the middle of the massage, she called off the session and made a distress call to the police, claiming that the masseuse touched her inappropriately. The police immediately sealed off the spa. Soon, both parties got into a long-drawn, intense legal wrangle. With no solution in sight, the case was eventually referred for mediation. The mediator reviewed the case, listened to the two sides - the spa owner didn't want to take a hit on the brand's image and the celebrity wanted to avoid publicity on the topic. The mediator suggested that instead of a long-drawn trial, the owner could pay a compensatory fee for the inconvenience and trauma caused to the celebrity by the spa employee's behaviour. Both parties found the verdict reasonable and the case was settled amicably.
Soon after acquiring a well-known hospital brand, a business group in Orissa discovered that crores of money was owed to some medical equipment dealers who had supplied to the hospital. There were no documents or personnel involved to prove the transaction. The suppliers were MSME businessmen who had been doing business with the hospital for a long time. When the case was referred for mediation, the mediator helped the new owners realise that waiving off the money owed or facing the suppliers in court would be tantamount to breaking their long-term trust in the hospital. It would not work in favour of the fresh start for the hospital. In the end, the new owners paid a portion of the dues and both parties agreed to a beneficial supply agreement going forward with a better process for reconciliation. Further, in an effort to honour and renew the suppliers' goodwill gesture, the hospital gave stall spaces within the campus free of lease for four years.
In both cases, mediation helped in working out solutions more effectively than arbitration. But, though conciliation has been a traditional practice in the rural administrative system, it is still not the widely adopted route for settling civil disputes.
History Of Relevance
In India, mediation started figuring as a solution to workplace disputes only after the amendment was made to Section 89 of the Civil Procedure Code in 2002. Eventually, it gained more prominence when the Supreme Court set up a committee to create rules and high courts started training lawyers in mediation and establishing court-annexed centres. Cases that weren't criminal in nature yet and had the possibility of an out-of-court settlement were referred for mediation. But still the process didn't gain much recognition since the disputing parties weren't bound to the verdicts delivered by the mediators. Eventually, in 2018, Section 12 A of the Commercial Courts Act clarified the tenets of enforceability of verdicts arrived through mediation. Says Anuroop Omkar, Commercial Mediator and Partner, A.K. & Partners, "The mediation settlement arrived under the section had the effect of a civil court order or arbitration award on agreed terms."
"The parties were allowed autonomy to use a dispute resolution system and choose their mediator. This not only helped solve the problem, but also took away doubts in the parties' minds," adds Omkar, who is also Director, Bridge Policy Think Tank, and Mediator with World Bank and Office of the Ombudsman for UN funds and programmes.
Court-annexed mediation centres function with their own set of rules in high courts across the country. Shiv Kumar, a Master Trainer and Mediator at the Bangalore Mediation Centre (BMC) established by the High Court of Karnataka in 2004, explains the kinds of cases BMC works on. "In addition to engaging in court-annexed mediation under Section 89 of the CPC, BMC has established a pre-litigation desk as required by the Supreme Court, which also offers mediation in Section 498A cases. Cases from the SC are also referred to the BMC." There are 110 empanelled mediators and BMC operates at the two benches of the high courts at Dharwar and Kalaburgi.
In order to have competent commercial mediators who could handle a variety of disputes, court-annexed mediation centres organised refresher courses for mediators. Since 2016, the Indian Institute of Corporate Affairs (IICA), a think tank under the Ministry of Corporate Affairs, has been conducting a 45-hour training programme on commercial mediation and negotiation in New Delhi, Mumbai, Bangalore and Chennai.
Former CEOs, company secretaries, psychologists and people from various backgrounds, who have been trained by the IICA, are functioning as mediators, resolving disputes ranging from property and partnerships to those arising out of commercial transactions and more. So, does the training prepare mediators for the variety of cases? "Yes," says Kumar of BMC. "Training addresses critical issues such as understanding the genesis of the conflict and strategies of resolving the conflict. Communication, language, listening, perception and negotiation skills coupled with techniques of negotiation are also groomed," he adds.
Chitra Narayan, Mediator and Co-founder of Foundation for Comprehensive Dispute Resolution, Chennai, agrees that there is more to formal learning than training programmes. "The training is the starting point. There is a need for continuing and refresher trainings, and for exchange among mediators. In these exchanges we can share difficulties encountered in the process, discuss and evaluate our work to gain more insight."
The Good And The Bad
Absolute Water Pvt. Ltd., which designs, installs and commissions 100 per cent green sewage treatment plants in establishments, had a client who didn't pay the dues. After waiting for a year, the company resorted to mediation and achieved an amicable solution. "Mediation proved the fact that we were ready to pursue the matter lawfully, and could look for an out-of-court settlement, too, without wasting the client's time and money. It also helped in keeping the client's reputation intact," says Smita Singhal, Director, Absolute Water.
C.A. Abhishek Soni, also the CEO and Co-founder of Tax2Win, the second-largest online platform in India for filing I-T returns, took his legal counsel's suggestion and engaged in mediation to resolve a dispute involving his start-up. He is satisfied with the outcome. "It is quicker and more effective since both parties along with a common mediator sit with a clean and clear intention to resolve the issue," says Soni, who is now motivating others in the start-up community to try mediation for conflict resolution.
But, even though mediation solves disputes effectively and in a relatively lesser time, less than 5 per cent cases are attended to in mediation. The reason is a lack of awareness, as a result of which, litigation and arbitration end up as default options. Moreover, big corporates prefer to take the judicial route to resolve disputes to provide concrete answers to shareholders. So, though mediation liberates the disputants from jurisdiction and is a popular global practice, it is still a voluntary process and the final decision rests on the parties involved. In most cases, mediation serves as the looking glass that helps the parties in a realistic assessment. It helps them develop an unbiased approach in communicating with the intent to resolve, and also inspires their approach to dispute resolution.
Court-referred Or Private?
Though court-referred mediation is the most popular in India, private mediation is also catching up. "The disputants would not harden their respective stands and positions in private mediation. Their inclination to be receptive to new ideas and solutions will be substantially greater there than in court-annexed mediation," says Kumar of BMC.
Ideally, mediation for a case shouldn't go beyond 90 days to a maximum of six months. If it exceeds the time limit, then it is probably not the best issue to be mediated and should be sent to court. In order to effectuate the process, courts sometimes match cases with mediators.
For mediation to gain a strong foothold in India, there's a need to establish a system that signifies a problem-solving approach. The responsibility of instilling integrity, however, rests with all stakeholders, says Omkar of A.K. & Partners. "The higher judiciary must refer more cases. Law students must not only be taught to argue the right and wrong, but also to find solutions to problems. Some mandate for the judiciary pertaining to commercial matters for the commercial bench, National Company Law Tribunal (NCLT), National Company Law Appellate Tribunal (NCLAT) and the new consumer forum needs to be brought in. From each bench, a specific percentage should be referred for mediation," he adds.
The Road Ahead
The pandemic and the air of uncertainty around it have improved the acceptance for mediation. Informal settlements are on the rise and because of the ease of conduction and economy of time, mediation has become a cost-saving alternative for the parties involved. Recently, many international organisations have strengthened their mediation panels and India is expected to follow. Specifically, online dispute resolution has worked well for clients in urban India. Though technical and practical glitches persist, the demand is surging.
Omkar of A.K. & Partners points to a recent decision by the Bar Council of India. "The council has made mediation a mandatory part of under-graduate and post-graduate courses... Nearly 1.5 lakh qualified lawyers will come into the field."
In addition, in 2019, India became one of the signatories to the Singapore Mediation Convention, which aims to mediate and solve commercial disputes between companies or parties based in different countries. "It is going to bring about a lot of welcome changes," says Narayan of Foundation for Comprehensive Dispute Resolution. "If India ratifies the convention and makes a law, it will instill confidence to use mediation for companies that have cross-border business relationships. But, it needs to be supported by legislative reforms."
Vijayalakshmi Sridhar is a Chennai-based journalist