AMENDMENTS MADE BY ‘THE MEDIATION ACT, 2023 TO VARIOUS ACTS

[Mr. M. GOVINDARAJAN]

The Medication Act, 2023 brought to amendments in the following Acts-

• The Indian Contract Act, 1872;
• Civil Procedure Code, 1908;
• The Legal Services Authorities Act, 1987;
• The Arbitration and Conciliation Act, 1996;
• The Micro, Small and Medium Enterprises Development Act, 2006;
• The Companies Act, 2013;
• The Commercial Courts Act, 2015;
• The Consumer Protection Act, 2019;

Amendment to Indian Contract Act

Section 28 of the Contract Act provides that the agreements in restraint of legal proceedings are void.  This section provides that every agreement,-

• by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or
•  which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to the extent.

There are three exceptions to this section as detailed below-

• Saving of contract to refer to arbitration dispute that may arise.
• Saving of contract to refer questions that have already arisen.
• Saving of a guarantee agreement of a bank or a financial institution.

The amendment substituted the new for the first two exceptions. 

The newly substituted first exception provides that this section shall not render illegal a contract by which 2 or more persons agree that any dispute that may arise between them in respect of subject shall be referred to resolution through arbitration or mediation.

The newly substituted second exception provides that this section shall not render illegal any contract in writing by which two or more persons agree to refer to arbitration or mediation any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration or mediation.

Amendment to Civil Procedure Code

Section 89 of the Code provides the procedure for settlement of dispute outside the Court.  According to this Section the Court may formulate settlement through arbitration or conciliation or Lok Adalat or mediation.

The Amendment substituted a new section for Section 89 of the Code.  The newly substituted Section 89 provides that where it appears to the Court that the dispute between the parties may be settled and there exists elements of settlement which may be acceptable to the parties, the Court may refer the dispute to-

• arbitration under the provisions of the Arbitration and Conciliation Act, 1996;
• mediation to the court-annexed mediation centre or any other mediation service provider or any mediator, as per the option of the parties, under the provisions of the Mediation Act,2023;
• Lok Adalat in accordance with the provisions of section 20 (1) of Legal Services Authorities Act, 1987;
• effect compromise between the parties and shall follow such procedure as deemed fit for judicial settlement.

Amendment to Legal Services Authority Act

Section 4(f) of the Legal Services Authorities Act provides that the Central Authority shall encourage the settlement of disputes by way of negotiations, arbitration and conciliation.

The Amendment substituted Section 4(f) of the Legal Services Authorities Act by a new one.  The newly substituted Section 4(f) provides that the Central Authority shall encourage the settlement of disputes, including online by way of negotiations, arbitration and conciliation.

Amendment to Arbitration and Conciliation Act

Sections 61 to 81 of the Arbitration and Conciliation Act provide the procedure of conciliation proceedings.  The amendment substituted all the sections from 61 to 81 by a new section 61.  The newly substituted section 61(1)  provides that any provision, in any other enactment for the time being in force, providing for resolution of disputes through conciliation in accordance with the provisions of this Act, shall be construed as reference to mediation as provided under the Mediation Act, 2023.  Section 61(2) provides that Conciliation as provided under this Act and the Code of Civil Procedure, 1908, shall be construed as mediation referred to in clause (h) of section 3 of the Mediation Act, 2023.

The newly substituted section 62 provides that notwithstanding anything contained in section 61, any conciliation proceeding initiated in pursuance of sections 61 to 81 of this Act as in force before the commencement of the Mediation Act, 2023, shall be continued

as such, as if the Mediation Act, 2023, had not been enacted.

Amendment to MSME Act

Section 18 of the Act provides that disputes may be referred to Micro and Small Enterprises Facilitation Council.  The Council may conduct conciliation proceedings between the parties.  If no settlement is arrived at between the parties the Council may refer the matter to arbitration.

The amendment substituted Section 18 by the new one.  The newly substituted Section 18 provides that any party to a dispute may, with regard to any amount due under section 17, make a reference to the Micro and Small Enterprises Facilitation Council.  The Council shall either conduct mediation itself or refer the matter to any mediation service provider as provided under the Mediation Act, 2023.

Where the mediation initiated is not successful and stands terminated without any settlement between the parties, the Council shall either itself take up the dispute for arbitration or refer it to any institution or centre providing alternative dispute resolution services for such arbitration and the provisions of the Arbitration and Conciliation Act, 1996, shall, then apply to the dispute as if the arbitration was in pursuance of an arbitration agreement referred to in section 7(1) of that Act.

The Micro and Small Enterprises Facilitation Council or the centre providing alternative dispute resolution services shall have jurisdiction to act as an Arbitrator or mediator under this section in a dispute between the supplier located within its jurisdiction and a buyer located anywhere in India.

Amendment to Companies Act, 2013

Section 442 of the Companies Act provides that the Central Government shall maintain a panel of experts to be called as the Mediation and Conciliation Panel for mediation between the parties during the pendency of any proceedings before the Central Government or the Tribunal or the Appellate Tribunal under the Act.   The Central Government or Tribunal or the Appellate Tribunal, as the case may be, shall appoint one or more experts from the panel.  The panel shall within a period of 3 months from the date of such reference and forward its recommendations.

The amendment substituted Section 442 of the Companies Act by a new Section.  The newly substituted section provides that any of the parties to proceedings before the Central Government, Tribunal or the Appellate Tribunal may, at any time apply to the Central Government, Tribunal or the Appellate Tribunal for referring the matter pertaining to such proceedings for mediation.  The matter shall be referred to mediation to be conducted under the provisions of the Mediation Act, 2023.  The Central Government, the Tribunal or the Appellate Authority may refer the dispute which is pending before that Authority, suo motu to mediation to be conducted under the provisions of Mediation Act, 2023. 

The mediator or mediation service provider shall file the mediated settlement agreement arrived at between the parties with the Central Government or the Tribunal  or the Appellate Tribunal which shall pass an order or judgment making the said mediated settlement agreement as part thereof.

Amendment to Commercial Court Act

Chapter IIIA (Section 12A) of the Commercial Court Act, 2015 provides the procedure for pre-institution mediation and settlement.  The same has been substituted by the amendment act by a new section.  The newly inserted Section 12A provides that 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-litigation mediation in accordance with such manner and procedure as may be prescribed by rules made by the Central Government.

The Central Government may authorize, by notification-

• the Authority, constituted under the Legal Services Authorities Act, 1987; or
• a mediation service provider as defined under clause (m) of section 3 of the Mediation Act, 2023.

The above said Authority shall complete the process of mediation within a period of 180 days from the date of application of the plaintiff.  The said period may further be extended for a period of 60 days with the consent of the parties.  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 and the mediator.

Amendment to Consumer Protection Act, 2019

The amendment omitted the following sections of the Consumer Protection Act, 2019-

• Section 2(25) - definition of the term ‘mediation’;
• Section 2(26) - definition of the term ‘mediator’;
• Section 28(1) - The District Commission shall, on admission of a complaint, or in respect of cases referred for mediation on failure of settlement by mediation, proceed with such complaint.  The amendment proposed to omit the words ‘The District Commission shall, on admission of a complaint, or in respect of cases referred for mediation on failure of settlement by mediation, proceed with such complaint.
• Section 41 - third proviso omitted;  The third proviso provides that no appeal shall lie from any order passed under sub-section (1) of section 81 by the District Commission pursuant to a settlement by mediation under section 80.
• Chapter V - Section 74 to 81 of the Act deals with the procedure of mediation.  The amendment omitted Chapter V.

Section 37 of the Consumer Protection Act provides the procedure for reference to mediation. The amendment substituted Section 37 by new sections 37, 37A and 37B. 

Section 37 provides that the District Commission or State Commission or the National Commission, shall either on an application by the parties at any stage of proceedings refer the disputes for settlement by mediation under the Mediation Act, 2023.

Section 37A provides that pursuant to mediation, if an agreement is reached between the parties with respect to all of the issues involved in the consumer dispute or with respect to only some of the issues, the terms of such agreement shall be reduced to writing accordingly, and signed by the parties to such dispute or their authorized representatives.  The mediator shall prepare a settlement report of the settlement and forward the signed agreement along with such report to the concerned Commission.  Where no agreement is reached between the parties within the specified time or the mediator is of the opinion that settlement is not possible, he shall prepare his report accordingly and submit the same to the concerned Commission.

Section 37B provides that the District Commission or the State Commission or the National Commission, shall, within 7 days of the receipt of the settlement report, pass suitable order recording such settlement of consumer dispute and dispose of the matter accordingly.  Where the consumer dispute is settled only in part, the District Commission or the State Commission or the National Commission, shall record settlement of the issues which have been so settled and continue to hear other issues involved in such consumer dispute.  Where the consumer dispute could not be settled by mediation, the District Commission or the State Commission or the National Commission, shall continue to hear all the issues involved in such consumer dispute.