(The article was first published on moneylife.in on 10 September 2018)
“An ounce of mediation is worth a pound of arbitration and a ton of litigation!” — Joseph Grynbaum
These words by Joseph Grynbaum stand true even today. Seeking justice through the process of litigation is a daunting task and inherently expensive. Even large corporates with deep pockets are wary of getting involved in the long drawn legal battles in courts. The judicial system is being overburdened with pending litigation and Supreme Court (SC) is taking cognisance of the need to have professional managers in courts. This is where mediation plays an important role, not only in saving money and time, but delivering justice to both the parties in a time bound manner.
Litigation traditionally is an intensive process during which there is a constant back and forth shuttling between the parties and their respective lawyers. Due to the nature of such interactions, cases keep piling up in the High Courts and the Supreme Court. But, with over 33 million cases pending in various court and the average time for resolution as high as 15 years or more, there is a crying need for alternate dispute resolution (ADR) processes.
The textbook definition of mediation says it is a way of resolving disputes between two or more parties with concrete results. Typically, a third party, or the mediator assists both the parties to negotiate a settlement. Disputants may mediate disputes in a variety of domains, such as commercial, legal, diplomatic, workplace, community and family matters. It also helps reduce the burden of courts, which are struggling to cope with legal pendency.
Mediation becomes a viable proposition the minute both parties to a dispute give some thought to the time and cost involved in litigation. There is also another interesting dimension to mediation, that was brought out at a panel discussion organised to launch the mediation centre of the Bombay Chamber of Commerce and Industry (BCCI) a couple of months ago. One panellist noted that litigation has a finality to it and breaks business relationships; but, often, there are disputes between companies and their contractors or suppliers, that reach a stage where intervention is required for fair resolution but neither party really wants to end the relationship.
Mediation through a neutral intermediary is ideal in these circumstances.
This usually involves having a trusted third party to hear both sides and suggest a fair resolution. The mediator may be a legal expert or a domain expert in the subject matter of the dispute. It is important to note that although mediation is a less rigid and informal process, it is not unstructured. It is in fact quite meticulously planned with a clear rule book, albeit with a certain level of flexibility. This is one reason why industry chambers are encouraging their members to opt for mediation as a faster way of resolving issues.
The BCCI (Bombay Chamber of Commerce and Industry)’s Centre for Mediation and Conciliation (CMC) was launched in June this year; Sumit Banerjee is its chief mentor. The CMC has been recognised by the Bombay High Court and Indian Institute of Corporate Affairs as a body to help resolve commercial disputes. BCCI’s mediation panel has retired judges from Supreme Court such as Justice BN Srikrishna, Justice Deepak Verma, Justice VM Kanade, Bill Marsh (United Kingdom), Jeremy Lack (Switzerland), Prathamesh Popat from Mumbai, Sriram Panchu and A Jawad from Chennai and Ekta Bahl from Samvad Partners, Hyderabad.
The CMC, envisaged by BCCI, provides mediation services for all commercial disputes- shareholder disputes, board consensus building, supplier disputes, and employment disputes across a wide range of sectors, including engineering, infrastructure, logistics, banking, FMCG, banking, insurance etc. Interestingly, since CMC has mediators who are empanelled by the High Court, disputes that are already being litigated may also be referred by judges to the centre for mediation. In these cases, the terms of settlement would be recorded in the form of consent terms to be presented before the Court, which will record the same as a consent decree and make it enforceable like any other court decree.
The CMC insists that it is committed to provide mediation services at reasonable costs and conduct proceedings with full confidentiality.
There are two major issues that stand in the way of businesses opting for mediation to resolve disputes. One is that the government is often a party to disputes and these invariably land up in courts. In fact, the government — through its various departments and companies — is the biggest litigator in India. And since government is rarely in a hurry to resolve disputes and tends to file appeals even when there is a stinging verdict against it, the pendency in courts due to government itself is huge. This makes it even more important for business to seek ADR for other disputes that are still within their control. If chambers of commerce take the lead in encouraging mediation and the voluntary acceptance of outcomes, it will go a long way in making business easier to conduct in India. It is especially important to build awareness and understanding about mediation and its modalities among micro, small and medium enterprises.
In an article posted on the CMC website, Mr Banerjee says, while data about the success of mediation in India is sketchy, international experience is very heartening with over 50% success rates in most cases and big savings in time and cost. He writes, “The comparative efficiency of mediation over litigation is well known. For example, an EU report of 2014 found that both average time and cost to arrive at an outcome, came down drastically in most EU nations such as UK, France, and Italy, in mediation cases vs litigations. Most impressive were the efficiency improvements achieved through mediation in Italy, where average time to resolution came down from 1185 days to 66 days, and cost came down from Euro 16000 to a mere 3000 Euros. For a comparison, the average life of a case in India is 13 years, and litigants in the country spend an estimated total of Rs30,000 crore per year towards court hearings.”
He has similar numbers about Singapore as well. The Singapore Mediation Centre (SMC) has dealt with more than 3,600 disputes with a settlement rate of 70% of which 90% of the disputes were resolved in one working day. In Hong Kong, a court annexed mediation centre records a total of 780 cases in 2017 with a 61% success rate
Various sectors in India are especially amenable for ADR and more extensive use of mediation. The real estate sector, riddled with litigation and multiple stakeholders with diverse interests is one that is especially fit for dispute resolution through mediation, but it requires awareness building and a nudge by industry leaders to persuade stakeholders to opt for it. The two types of mediation available in India are:
Private Mediation: When mediation is initiated by the parties themselves and is facilitated by institutions which are neutral bodies providing the right environment and impetus for the parties to settle the dispute. These institutions have a varied panel of mediators which include industry experts having a deep understanding and experience in dealing with commercial and technical issues, thereby assisting the parties to understand each other’s position and arrive at a mutual consensus while resolving the dispute.
Court annexed, referred mediation: Court-annexed mediation and conciliation centres are now established at several courts in India and the courts have started referring cases to such centres. In court-annexed mediation the mediation services are provided by the court as a part and parcel of the same judicial system as against court-referred mediation, wherein the court merely directs the parties to mediate and settle the matter under the surveillance of a professional mediator of their choice.