The Commercial Courts Act, 2015 is a seminal legislation for expeditious adjudication of a wide array of commercial disputes in India. The legislation underwent substantial amendments by notification of The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts (Amendment) Act, 2018 (the “Amendment Act”).
The Amendment Act introduced a new Chapter III-A, titled “Pre-Institution Mediation and Settlement”. This Chapter provides for mandatory reference to mediation by an aggrieved party for all disputes falling within the definition of “Commercial Dispute” under Section 2(1)(c) of the principal Act, except in cases where urgent interim relief is sought. Such mediation proceedings have to be mandatorily completed within three months from the date of filing of application, extendable by a further period of two months with consent of parties.
In January 2020 the Supreme Court has, reportedly, set up a panel to firm up a draft legislation for giving legal sanctity to disputes settled through mediation. The panel, to be headed by mediator Niranjan Bhat, is required to recommend a code of conduct for mediators, who are legal experts. News reports suggest that the Committee met in Hyderabad on January 12, 2020 to consider suggestions for a legislation put forth by mediators from all over India. The mediators reportedly emphasised on confidentiality, the voluntary nature of the process, neutrality, avoiding conflicts of interest, enforceability of settlement etc.
It is universally recognised that mediation offers certain inherent advantages to disputants, for instance:
A mediation is less time consuming than a regular litigation. Determination of a dispute by the court may take years, as it goes through multiple tiers of the judicial process. Further, the costs associated with mediation would be far less by comparison.
As a consensual process, a mediation depends on the parties’ ability and willingness to move from their initially asserted positions, in a spirit of ‘give and take’. Parties are encouraged to be more empathetic and open to understanding the counter point.
The efficacy of mediation is often directly proportional to the control the parties have over an eventual resolution. This means that the parties have the flexibility to evolve hitherto unexplored and innovative solutions, with the aid of the mediator.
Court hearings are generally public, while mediation is a confidential process. The endeavour is to encourage parties to participate in open discussions without compromising their stated positions and seek mutually acceptable solutions.
Since a successful mediation results in a mutually agreeable solution which is reduced into writing and signed by parties, compliance is generally high. At the same time, a recalcitrant party can be legally compelled to comply with the settlement through execution in court, where necessary.
In the present Covid-19 situation, business and industry all across the world has been forced to reckon with unprecedented (hopefully short term) challenges such as low demand and consumption, piling up of inventories, logistic and supply chain disruptions, maintenance of credit facilities, delayed performance of contracts and lengthening of payment cycles, to state a few. In such circumstances, businesses are dependent, and will increasingly depend, upon the continuous and unobstructed performance of commercial contracts involving supply of goods and services, which may need to be re-calibrated to reflect current realities. This will necessitate a greater acknowledgement (and indeed acceptance) of the mutual interdependence of markets and recognition of practical issues affecting performance of contracts, that transcend national and territorial lines.
It is also likely that many businesses will find themselves on both sides of the spectrum i.e. they will be aggrieved or disadvantaged by non-performance of contracts by counter parties in some cases, while also incurring the risk of contractual defaults in certain other cases. In this scenario, the advantages of a mediated settlement where contracting parties recognise and take into account both the fine letter of the law/contract as well as the practical challenges of complying with the same, cannot be over-emphasised.
Additionally, businesses will have to remain relevant and competitive in these rapidly changing times by overcoming such operational challenges and strengthening existing commercial relationships, rather than snapping or fraying them. Given the realistic risks of established commercial relationships going sour in case of a litigation, disputants may find it more prudent to settle their disputes through the aegis of a mediator, in case alternative avenues of mutual resolution fail.
Recent trends also indicate that companies are increasingly moving towards achieving more fiscal discipline and efficiency, the emphasis being on prioritising “essential” costs such as employee salaries, health and sanitation measures, resumption of supply chains etc. over relatively “non-essential” costs including, for instance, litigation and advertising. The high and recurring costs associated with litigation will discourage disputants who may likely find alternative dispute mechanisms like mediation more attractive in these stressed times.
The current disruption in functioning of courts in India is another key element in this debate which has compounded the already existing long timelines in judicial adjudication of disputes. Given the inherent uncertainties around court decisions which typically traverse through several rounds of challenges to attain finality, parties may, in the post Covid -19 disrupted scenario, prefer to explore a negotiated settlement through mediation (or other alternative dispute mechanisms) where they are more likely to resolve their disputes amicably and quickly. All of these factors may assume greater significance where complex disputes arise between nationals/entities of more than one country or in respect of trans-border performance of contracts involving the applicability or construction of laws or trade practices of multiple jurisdictions.
The author believes that in the coming days, mediation will become a preferred option for businesses to evolve quicker, more efficient and long lasting solutions enabling them to “get on with life” beyond Covid-19. This will, hopefully, reduce the burden on our Court systems.
This is intended for general information purposes only. The views and opinions expressed in this article are those of the author/authors and does not necessarily reflect the views of the firm.
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