The FAQs have been prepared by Satvica Dixit, a 2nd-year BBA LLB student at University of Mumbai Law Academy. She is currently interning with LatestLaws.com.
INTRODUCTION
The Commercial Courts (Pre Institution Mediation and Settlement) Rules, 2018 are made under Section 21A(2) read with Section 12A(1) of the Commercial Courts Act, 2015. The foundation Act for this Act is the Commercial Courts Act, 2015 which was enacted to set up an alternative and faster dispute resolution for commercial matters. The amendment or new rules passed in 2018 now makes it compulsory to exhaust the pre-institution mediation and settlement proceedings before initiating any legal proceedings in court. The exception being that mediation would not be mandatory in those cases which urgent interim relief required. This model of undergoing mandatory mediation at an initial stage and having the right to opt-out and approach the court for further relief was something new introduced in the country. It is now seen as a welcome push to enable and expedite alternate dispute resolution through mediation.
Q1. What do you mean by the word “mediation”?
Answer: Mediation is the alternative means of dispute resolution wherein a mediator resolves, reconciles, and settles any disputes between the parties. These disputes can be of any nature but this Act specifically talks about mediation in commercial disputes.
Q2. What are the scope and objectives of the Commercial Courts (Pre-institution mediation and settlement) Rules 2018?
Answer: The Commercial Courts Act lays down a systematic procedure for quick resolution of high-stake commercial disputes with strict timelines for filing of pleadings and procedure. The definition of “Commercial Disputes” under the Act is broad, it mostly covers commercial transactions and also includes disputes arising out of intellectual property rights. In 2018, this Act was amended to bring some clarity to the procedure and to introduce the mandatory mediation provision so that the remedy of mediation is fully exhausted before initiating court proceedings. The amendments also brought the commercial dispute valued at more than INR 3,00,000 under the purview of the Act.
Q3. What is Pre-institution Mediation as defined in the Commercial Court (pre-institution mediation and settlement) Rules 2018?
Answer: Section 12A of the Commercial Courts Act provides parties with an alternative means to resolve commercial disputes through discussions and negotiations with the help of a mediator. This section says that no suit shall be instituted unless the plaintiff exhausts the remedy of pre-institution mediation by manner and procedure for the commercial disputes. However, if the parties are seeking urgent interim relief then they can initiate the suit but not otherwise. This section also apprises the appropriate legal authorities for pre-mediation as per Legal Services Authorities Act, 1987.
Q4. What is the procedure for initiating Pre-institution mediation?
Answer: The procedure for initiating mediation proceedings is laid out in the Commercial Courts (Pre-Institution Mediation and Settlement) Act, 2018.
- As per the Act, the plaintiff needs to apply with the State or District Legal Services Authority constituted under the Legal Services Authorities Act, 1987 to initiate a mediation.
- After receiving the application, the authority will issue a notice to the other party to appear within 10 days of the notice and give consent for the mediation proceedings.
- There will be the issuance of a final notice if the response is not received within 10 days of the initial notice.
- If the other party fails to appear even after the final notice or refuses to participate in the mediation proceedings, the authority will treat the mediation as a non-starter and will prepare a report to that effect.
- If the opposing party agrees to participate, then the mediation proceedings begin. Following the negotiations and meetings with the mediator, when the parties arrive at a settlement, it is recorded in a settlement agreement.
Q5. What is the exact process of mediation carried out by the mediator?
Answer: 1. Firstly, the mediator has to explain the mediation process to the parties after which the date and time of each mediation sitting will be decided in consultation with the parties.
2. The mediator has the discretion to hold meetings with the parties separately or jointly during the course of mediation. The parties can share their proposed terms of settlement in separate or joint sittings with the mediator.
3.Once both the parties reach a mutually agreed settlement, it must be reduced in writing by the mediator along with their signatures. The mediator thereafter provides the settlement agreement to the parties and also forwards a signed copy of the same to the Legal Services Authority.
4. The mediator also needs to maintain the utmost confidentiality while dealing in such matters with the other party or any third party.
Q6. What happens in cases where there is no mutual agreement of settlement?
Answer; In cases wherein mutual agreement of settlement couldn’t be achieved between the parties within three months or if the mediator believes that the settlement is not possible then the mediator should submit a failure report including the reasons in writing to the Legal Services Authority for the disagreement.
Q7. What are the main highlights of the amendment made in 2018 in the Commercial Courts Act, 2015?
Answer: The amendments made in the year 2018 were an attempt to expand the scope of commercial courts in India. The highlights of amendments are:
- The minimum Value of dispute (pecuniary jurisdiction) for initiating the pre-institution mediation was reduced to INR 3,00,000.
- The Act split Commercial courts into two types namely:
- District Judge Level
- Below District Judge Level
- Also, the Commercial Appellate Courts were introduced in case of appeals related to the judgement of the commercial courts.
- The rule of mandatory pre-institution mediation was prescribed before initiating any court proceedings.
- The Act also laid down the rule of government to appoint the commercial court judges.
Q8. What benefits mediation has over other legal proceedings?
Answer: The best advantage that Pre-institution mediation provides over other proceedings is that it must be completed within a period of three months from the date of application, with a possible extension of two months with the consent of the parties. This time-bound process saves time and costs incurred by the parties involved are also minimal as compared to other proceedings. Moreover, a higher level of confidentiality is maintained related to disputes and strategies which is the prime key in these businesses.
Q9. What is the mediation fee for the Pre-institution mediation?
Answer: The mediation fee is the amount that needs to be paid to the authority as a one-time mediation fee before the commencement of the proceedings. This fee will differ according to the amount claimed by the parties and will be shared equally by both parties.
Q10. What are the ethical guidelines to be followed by the mediator?
Answer: The mediator shall:
- The mediator needs to be very fair, just, and unbiased while dealing with negotiations and settlements.
- The mediator should ensure that the parties are fairly informed and have an adequate understanding of the procedural aspects of the mediation process.
- The confidentiality of the whole procedure needs to be maintained by the mediator and he/she should not interact with media or make any details public related to a commercial dispute.
- The mediator must ensure not to meet and communicate with the parties or their representatives privately except during the mediation sittings in the premises of the authority.
- The mediator should recognise that the mediation is based on the principle of self-determination by the parties and that the process relies upon the ability of parties to reach a voluntary agreement without any biased opinion.
- The mediator should refrain from any guaranteed results or promises to any party.
- The mediator should avoid any impropriety while communicating with the parties and also disclose any prior interest in the subject-matter of the dispute.
Q11. Is there any maintenance and publication of mediation data?
Answer: If the mediation is carried out by District Legal Services Authority then they have to forward the detailed data of the mediation to the State Legal Services Authority. The State Legal Services Authority will then maintain the data of all mediations under its jurisdiction and publish the same quarterly, on its website. Although the data is published on site then the confidentiality of the essential data is ensured.
Q12. How is the venue for the mediation is fixed?
Answer: The venue for conducting the mediation will be the premises of the authority under whose the mediation is requested or any other place where the same authority has allowed to carry out the procedure.
Q13. Are the parties allowed to represent themselves?
Answer: Yes, unlike the legal proceedings carried out in court where the parties are represented only through their counsels, here the parties can either choose to represent themselves or can hire a representative for the same
