corporate law
Section 12A of the Commercial Courts Act, 2015 (hereafter referred to as "the CA Act") requires parties to engage in mandatory mediation rounds before initiating a lawsuit, specifically for commercial disputes. This requirement is unique to commercial matters and does not extend to other civil disputes. The legislative intent behind this provision aims to reduce litigation and conserve time and financial resources. While there are success stories of quicker resolutions due to this approach, the effectiveness of pre-litigation mediation raises significant concerns.
There are several reasons to reconsider the necessity of Section 12A of the CA Act:
Litigation as a Last Resort: In India, parties typically view litigation as a last option. They only approach the courts after exhausting all potential means of resolution. The imposition of mandatory mediation can serve as an additional obstacle for those already frustrated after attempting negotiation without success.
Existing Mediation Powers: Indian courts possess the authority to refer parties to mediation at any stage of the proceedings when requested. Therefore, the mandatory nature of Section 12A may be redundant. The Economic Advisory Council to the Prime Minister has also recommended making pre-litigation mediation voluntary, potentially expediting the resolution process and reducing associated costs.
Delays in Resolution: Mandating pre-litigation mediation can extend the time it takes for litigants to conclude their cases. This requirement does not necessarily expedite the resolution and may contribute to delays instead.
Exceptions in Urgent Cases: Section 12A allows parties to bypass the pre-litigation mediation process in urgent situations through a broadly defined exception. This means that many commercial disputes can be categorized under this exception, rendering the mediation mandate ineffective.
Multiple Rounds of Mediation: The process of pre-litigation mediation typically consists of several negotiation rounds. Notably, even if only one party attends while the other does not, a minimum of two mediation sessions will be required. This not only extends the timeline for case resolution but also increases the litigation costs for plaintiffs.
Encouraging mediation and negotiation is crucial, but mandating a comprehensive mediation process may not provide the right solution. Collaborative efforts from both lawyers and judges to expedite case resolutions—whether through mediation, negotiation, or trial—are essential. Instead of compelling parties to endure what may be an ineffective pre-litigation mediation process, a more flexible approach may lead to more satisfactory outcomes.