ADDRESS OF LD.
MEMBER SECRETARY, DSLSA
TOPIC : ROLE OF LEGAL SERVICE INSTITUTIONS IN HOLISTIC
SETTLEMENT OF COMMERCIAL DISPUTES
“My joy was boundless. I had learnt the true practice of law. I had learnt to
find out the better side of human nature and enter men's hearts. I realised
that the true function of a lawyer was to unite parties riven asunder. The
lesson was so indelibly burnt into me that a large part of my time during the
20 years of my practice as a lawyer was occupied in bringing about private
compromises of hundreds of cases. I lost nothing thereby, not even money,
certainly not my soul.”
— Mahatma Gandhi, Father of Nation
The method of resolving disputes through Mediation is not foreign in
our country. Village Panchayats and Nyaya Panchayats have been
functioning in the villages and many disputes at the village level have
been settled through conciliation and mediation in these Panchayats
for a very long time. But such remedy through Panchayat was sought
for more as convenience as they are more easily approachable than
the Courts which are located far away from the villages.
The first law in India to have enunciated mediation is the Industrial
Disputes Act, 1947. Conciliators were appointed and entrusted with
the duty of mediating in and promoting the settlement of Industrial
disputes.
By the Code of Civil Procedure (Amendment) Act, 1999, Section-
89 of the CPC was amended whereby mediation and judicial
settlement were envisaged as modes of settlement of disputes.
The amendment in Section- 89 was based on the recommendation
given by the Law Commission of India and the Malimath Committee.
Section- 89 now makes it obligatory for the Court after framing issues
to refer to the dispute for settlement either by way of arbitration,
conciliation, mediation or judicial settlement. The courts allow
further proceedings of the suit only when the parties therein are not
successful to settle their dispute through any of the alternative
dispute resolution methods.
Mediation is a method to resolve disputes amicably with the help of
an expert mediator and without the intervention of courts. This move
by the Government was welcomed by stakeholders across the board
as it was believed that this would ensure timely resolutions of
disputes while retaining business relationships between the parties, a
win-win for all – the Government, the overburdened judiciary
and the business community.
When a dispute is resolved through Mediation, there is no winner or
loser for the parties agree to the solution whereas in litigation
there is always a loser and even the winner of the litigation goes back
home at times feeling fully exhausted physically, mentally and also
financially.
DSLSA and Delhi Mediation Centers are unlocking new avenues to
reach out to the people and to serve the interest of the society and
Law, while maintaining all means of social distancing and public
safety, by encouraging more and more interactions in the virtual
world, in contrast to the traditional public dealing of the physical
world.
To make India a global destination for business and investment
and accordingly, to improve its ease of doing business rankings,
the Government of India took note of the observations made by the
Law Commission of India and established the Commercial Courts and
the Commercial Division and the Commercial Appellate Division in
the High Courts for speedy disposal of commercial disputes above a
specified value.
Commercial Courts, Commercial Division, Commercial Appellate
Division of High Courts Act, 2015, was enacted in the year 2015
with the objective of achieving speedy adjudication of Commercial
Disputes.
The year 2018 saw an amendment in The Commercial Courts,
Commercial Appellate Courts, Commercial Division and Commercial
Appellate Division of High Court Act and the amended act is now
called The Commercial Courts Act 2015. The Commercial Courts
(Pre Institution Mediation and Settlement) Rules, 2018 were also
framed in line with the aforesaid act for the purpose of resolving the
matters relating to commercial disputes in an efficacious and
expeditious manner.
As per the said enactments, all disputes falling within the definition of
“Commercial Dispute” under Section 2(1)(c) of the Commercial
Courts Act, which are valued Rupees 3 Lakhs or more, shall not be
instituted unless the plaintiff mandatorily exhausts the remedy of
Pre-Institution Mediation, to be conducted by the Legal Services
Institutions. Accordingly, the Legal Services Institutions are
conducting Pre Institution Mediation in respect of Commercial
Disputes across the country.
Section 12A of the aforesaid Act states as follows:
(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 (39 of 1987), for the purposes of pre-institution
mediation.
(3) Notwithstanding anything contained in the Legal Services
Authorities Act, 1987 (39 of 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 (36 of 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 (26 of 1996).
The newly institutionalized Section 12A provides that a suit
which does not contemplate any urgent interim relief under the
said 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.
In furtherance thereof, the Government authorized the State
and District Legal Services Authorities for the purposes of
pre-institution mediation.
Delhi State Legal Services Authority through its respective
District Legal Services Authorities and Delhi High Court Legal
Services Committee are mandated to facilitate the conduct of
mediation in all matters.
Mediation is carried out through the Mediation Centre in each of
the Court complex under the aegis of Delhi Mediation Centre and
the Secretary, DHCLSC/DLSA is the Nodal Officer for the
implementation of the Act and the Rules, and for conduct of
Pre-Institution Mediation.
PRE-LITIGATION MEDIATION PROCEDURE-
The applications in respect of commercial dispute are
entertained by the DHCLSC/the DLSA concerned having regard
to territorial and pecuniary jurisdiction and nature of
commercial dispute in terms of Rules.
Upon the DHCLSC/ the DLSA being approached by an interested
party/ the plaintiff, service is affected upon the opposite party
through Email/Whatsapp/Postal-Mail, upon payment of fixed
fee of Rs 1000
On the appearance of the defendant, consequent to the
completion of process of service, the matter is referred to the
mediation cell, if willingness is shown by both the parties. In the
event of no service or refusal of the defendant to enter into
mediation process or on the denial of the claim of the plaintiff by
the defendant, the matter is marked as non starter and the
plaintiff is at liberty to approach the concerned court to exercise
his rights and seek remedies as per the law.
To enable the process of Pre-Litigation mediation in COVID-
19 imposed lockdown, in entire process was facilitated
through electronic means, in addition to existing process and
procedure. The entire process was completed without ever
stepping in the offices of the DSLSA/ the DLSAs/the DHCLSC/the
Mediation Centres, by adhering to this special procedure.
Notice is issued to the opposite party in the specified form to
appear and thereby give consent to participate in the mediation
process. The opposite party has to appear within ten days of
the issue of the said notice.
If no response is received from the opposite party then the Legal
Services Authority issues a Final Notice. If the notice issued is
unacknowledged or if the opposite party refuses to participate in
the mediation process, the Legal Services Authority treats the
mediation process to be a non-starter and it makes a report and
endorses the same to the applicant and the opposite party.
If both parties to the commercial dispute appear before the Legal
Services Authority and give consent to participate in the
mediation process, then under sub-rule (7) the Legal Services
Authority then assigns the commercial dispute to a
Mediator and fixes a date for their appearance before the said
Mediator.
Any settlement reached in a pre-litigation mediation has the
same status and effect as that of an arbitral award on agreed
terms on the substance of the dispute rendered by an arbitral
tribunal, under section 30 of the Arbitration and Conciliation Act,
1996. Thus, the settlement arrived at is binding and
enforceable between the parties, and can also be presented
before a court of law in case of any breach by either parties.
ROLE OF LEGAL SERVICES INSTIUTIONS-
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-emphasized.
Additionally, businesses will have to remain relevant and competitive
in these rapidly changing times by overcoming such operational
challenges and strengthening existing commercial relationships.
It is more prudent to settle their disputes through the aegis of a
mediator, in case alternative avenues of mutual resolution fail.
Legal Services Authorities ensure that the process of mediation is
completed within a period of three months from the date of
receipt of application for pre-institution mediation. Hence,
commercial suits are settled in less time than in a regular litigation.
Legal Services Authorities focus on 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. This means that the parties have the
flexibility to evolve hitherto unexplored and innovative solutions, with
the aid of the mediator.
Legal Services Authorities maintain the Confidentiality of
proceedings. The endeavour is to encourage parties to participate in
open discussions without compromising their stated positions and
seek mutually acceptable solutions.
Delhi State Legal Services Authority through Pre-litigation mediation
of commercial disputes strives to enforce high-stakes contracts of
commercial nature, herald procedural reforms and to boost and
augment investor’s confidence. This would in turn also improve
India’s ranking in the Annual Ease of Doing Business Index formulated
by the World Bank.
CONLCUSION:
The Draft Mediation Bill, 2021 proposes to bring about a
standalone law on Mediation regarding the issues of domestic and
international mediation because India is a signatory to the
Singapore Convention on Mediation. It also provides for
registration of the Mediation Settlement Agreement and setting
up of Mediation Council of India.
Let the adversary system and ADR system not confront with each
other. This is necessary in order to revive the erosion in the faith of
the judiciary and the judicial system itself.
I would wish to end the session, by quoting Mr. Fali S. Nariman,
who has said in a message that was published in the Handbook on
Arbitration, as follows :-
“A mediator or conciliator must lead parties into the gray shaded
areas of a problem where a variable range of outcomes becomes
available to achieve a mediated consensual resolution. It is the
skill with which this “grey area” is negotiated that the success of
Part III of the Act will depend. Lawyers must advise their clients
to use Part III more often - they must educate and explain clients
on the benefits of conciliation.”
The slogan of the day should be ‘Mediate' ; Do Not ‘Litigate'.
THANK YOU
