The stability and success of any business is based on the strength of its relationships with its suppliers, personnel, customers and the society at large. A situation of conflict with or within this network can lead to the collapse of the entire system with ripple effects across sectors.
It is well known fact that 8 out of 10 business crash and burn due to inherent conflicts, which are neglected and not nipped in the bud. These conflicts turn into disputes which if not resolved in time drain the resources and cause the business to go downhill.
The most common source of commercial disputes is a mismatch of the parties understanding and expectations of contractual rights, obligations and performance. These differences between the parties can be addressed through mediation in order to avoid the risks, expense, delay and the stress of litigation that are likely to result if the differences spiral into an unresolved dispute.
On an average there are more than 40 lakh cases pending before various courts across the country. The average pendency of any case in the High Courts is about three to five years. In a suit filed before a District or Taluka court/s it takes nearly six years for the adjudication process to be completed. If an appeal, to at least one higher court, is filed by either party it is likely to take 10 more years, and if the matter is appealed before the Supreme Court, the average time increases by at least three more years. Further, based on the average number of hearings per day in each court, it is estimated that the total amount of money being spent by litigants just to attend court hearings excluding legal fees is Rs 30,000 crore -Rs. 50,000 crore per year!
Adjudication of business disputes has often left the parties dissatisfied and marred even if the decision has been in their favour. It has frequently burnt bridges and wrecked the working relationships between the parties. Adjudication is a process, of deciphering right and wrong, which is based the application of law to a given set of facts, it falls short of appreciating the sensitivity and delicacy of relationships between the parties and their connections. This process, when evaluated in terms of consumption of time and material involved, turns out to be extremely uneconomical. Even on a social level it affects the reputation of the business, its leaders, and the morale of employees.
The second most commonly adopted informal mode of dispute resolution in the commercial world, is for the top-level management, of the conflicting parties, to discuss and iron out the issues over a hot cup of tea/coffee. While a chat over the coffee table may break the ice between the differing parties it does not guarantee an effective resolution of disputes and needs an extra touch and finesse to nudge parties towards satisfactory resolution of the differences.
Thus, a formal Mediation brings in clarity and depth to the negotiations between the parties and subtly nurtures the sincere efforts of the parties to themselves arrive at an amicable resolution of the dispute. It is also the most time saving and cost effective mode of dispute resolution.
The Indian government in June 2018 amended the Commercial Courts Act 2016 by an insertion of Chapter IIIA, Section 12A, which mandates the parties to exhaust the remedy of ‘Pre-Institution Mediation’ before filing a suit, i.e the parties must first attempt to resolve their dispute through Mediation. This mandate is a clear move to enhance the ease of doing business. It will perk up the growth of the overall business environment, specially in the e-commerce, FMCG and retail sectors which are better off,resolving their disputes comfortably under the guidance of a Mediator and avoiding costly and time-consuming litigation.
Several courts across the country have set up Mediation Centres under the supervision of the District/State Legal Services Authority to meet this requirement of mandatory mediation. These Mediation Centres have advocates, and professionals trained in the art of Mediation and Mediation institutions like the Chambers of Commerce are also empanelled with them to help the parties navigate themselves towards an amicable resolution of their dispute.
Mediation is a confidential, informal, oral, more collaborative, facilitative, future-looking, interest-based process that bring parties to a calibrated, multi-dimensional, win-win remedy that is more durable because of the parties consent in the outcome.
Any information disclosed or proposal made or rejected by either party or the Mediator remains strictly confidential and cannot be leveraged upon in the event that the Mediation process is unsuccessful. This ensures that status quo is maintained as regards each party’s strengths and weakness before any other forum that may approach to adjudicate the dispute subsequently.
Listed below are three different case studies where Mediation has been an effective dispute resolution mechanism in the settlement of commercial disputes.
The most common of all commercial disputes are payment disputes. The parties spent the eight months trying arrive at a resolution to the conflict, but were unable to agree upon an effective payment schedule to clear off the debt within a stipulated time period. Here the Mediator facilitated the parties to formulate a payment plan, to clear the debt within six weeks. This was acceptable to both parties and left them immensely pleased with the solution.
It is not uncommon when the strengths of the parties to a contract are unequal and that a small business owner requires help with a contract dispute.
An e- commerce entrepreneur signed on to a 12 month contract with a large wholesaler for a monthly payment. As time went on, the entrepreneur continually increased this monthly amount, unaware that each time he did so he was actually entering into a new 12 month long contract.
Towards the close of the first 12 months of the initial contract when the entrepreneur called in to notify the other party of his desire not to renew the contract, he was informed that as per the terms he would have to pay a penalty for early determination of the contract for the period relating the increased monthly payment. Mediation allowed him to end the contract without the fee.
Supply dispute example
A dispute where an elevator manufacturer had been supplied a faulty elevator components. Despite him trying to negotiate with the with the company he’d purchased the components from, they had been put off for months, and eventually they refused to discuss the matter with him further.
Using mediation was a success for the elevator manufacturer with the supplier taking back the supplies, and agreeing to provide a new supplies with warranties and assurances of services should they be necessary.
Mediation in the true sense depicts equality before law as the parties irrespective of their status and strengths are jointly engaged in a dialogue to arrive at the solution that is mutually beneficial for both and each supporting the others cause. It is an experience the parties can draw upon in the future as well in relation to amicable dispute resolution.