This article was authored by R. Vigneshwaran from TNNLS, Trichi.

A good settlement is better than a good lawsuit”

  • Abraham Lincoln


The Indian Legal System especially the Judiciary has been questioned time and again regarding the piling of backlog of cases. It is recently pointed out that “over 2.67 crore cases are pending in almost 17,000 subordinate courts across the country of which 22.62 lakh cases are pending for more than 10 years”[1]. The archaic way of resolving disputes by the judiciary in this present contemporary world is highly impossible and the quick rate of disposal is highly unimaginable.

So, the legislatures thought and introduced the Alternate Dispute Resolution, which provide a platform for the parties to resolve disputes more amicably, by creating “Win-Win” situation. One such mechanism is the Mediation, it is nothing but a facilitated negotiation process in which the mediator does not decide the case instead, and the parties are in control of the result. Taking into consideration the progress and the result of the mediation outcomes which is proving to be the most amicable way of resolving disputes. Legislatures, thought and brought an amendment (in 2018) to the Commercial Court Act, i.e. Section 12A which stipulates mandatory pre-institution mediation i.e. the petitioner/ plaintiff is required to exhaust the remedy of mediation process before instituting a suit.

So, this paper seeks to understand Commercial mediation in India and additionally also addresses how effective the amendment is and also, Is India really capable of resolving the commercial disputes by way of mediation? Additionally this paper points out the opt-out model of Italy which is same as this amendment and also tries to bring out few important key changes to enhance and utilise the fruitfulness of this amendment.

No democracy works without compromise”

  • Barack Obama


Mediation is a process which is both new in terms of its emergence in the legal arena and old in terms of its timeless universality. So, it is very important to distinguish the modern mediation from traditional forms of dispute resolution. This article focuses primarily on the commercial mediation vis-à-vis the pre-institution mediation in the commercial disputes which is the sordid for the new dimensional mediation process.

From those bygones days of resolving disputes by way of constituting panchayat to mediation movement that had gathered momentum in 1970s in United States[2] and subsequently in various other States had laid down the foundation for resolving disputes amicably between the parties without knocking the doors of the court, gave way for the Alternative Dispute Resolution (ADR). However, in 1976 the National Conference popularly known as the Pound Conference took place in United States. The conference was conducted with the note on the failure access to proper and timely justice.[3] At the conference Professor Frank Sander introduced his now well-known concept of “the multi-door courthouse in which the doors represent a spectrum of dispute resolution options from which disputants entering the court house can choose”[4]. This multi-door courthouse represents an institutionalised approach towards importance of ADR.

Using the wave metaphor mistelis, contextualises “the introduction of ADR in the wave of liberalisation and privatisation of public services that swept the western world as well as the so called emerging markets in the late 20th Century”.[5] ADR are now renowned not as a distinct system of dispute resolution but also as a system that shows up the amicable way of resolving disputes in the current trend. The importance of the mediation are increasingly seen as an effective way to increase access to, participation in, and satisfaction with, the way legal disputes are resolved. So the legislatures amended the Commercial Courts Act to include pre-institution mediation as a mandatory provision to resolve the disputes.

Mediation – “A Philosophy Of Democratic Decision Making”

Mediation is a procedure for resolving controversies. It is a process in “which a neutral intervener assists two or more negotiating parties to identify matters of concern, develop a far better understanding of their situation and based upon that improved understanding, develop mutually acceptable proposals to resolve those concerns[6]. Therefore mediation embraces the philosophy of democratic decision making.

In terms of legal practise and legislative activity mediation is arguably the fastest growing form of ADR in the world. ADR provides a different sort of justice for solving disputes.[7] Mediation outcomes are pointed out to be useful to begin with the end in mind. “Mediation systems and schemes are usually established in an attempt to fulfil policy goals and objectives, which in turn are drawn from a set of core values”.[8] The core values are listed under two main objectives of mediations, they are:

  1. The first important core value of mediation being “Efficiency Objective”, meaning thereby in comparison with the court structure and the long drawn process; mediations’ are time bound and are resolved within short span of time.
  2. The second important core value is that, “Self-determination Objective of the parties”, the nitty-gritty of the mediation is to provide parties with the opportunity to play a greater role in the management of their dispute by actively participating in the dispute resolution process. Mediation provides forum for self-determination by encouraging parties to:
  • Identify their needs and interests;
  • Generate opinions to satisfy each party’s needs and to maximise fulfilment of interests and
  • Create their own outcomes[9].

Mediation “ferrets our problems and solutions that transcend the pleadings within the complaint”.[10] Thus, trust, flexibility and creativity become dynamic characteristics of a productive mediation. It is pointed out by Hilliard in this book[11] that, mediation is a powerful process for several reasons:

  • “It affords the parties the satisfaction of having “their day in court” without the expense of going to court. Many litigants want the opportunity to tell their story to a neutral, to be heard and to be validated in their concerns. Once this is done, it becomes easier to compromise and reach a settlement.
  • It provides the opportunity to explore options that could be achieved as the result of a court decision. The mediator can explore options for “win-win” solutions, options for “expanding the pie” and options for nuanced outcomes.
  • It can give the parties a chance to speak directly to one another”.[12]

Therefore, it can be said that, Mediation is a process of facilitated negotiation, meaning thereby “the mediator does not decide the case instead, the parties are in control of the result”[13]. The mediator’s role is to assist the parties in reaching a negotiated resolution.

The Position And Status Of Dispute Resolution In India

With the realisation of rights of the individual and to protect such rights are key notes for which people litigate over their fundamental rights, their properties or any kind commercial matters. After the globalisation in the 1990s’ the Indian legal and judicial system has had to come to terms with the reality of such globalisation. Being the seventh largest country and the 2nd populated country, there is a far-fetched burden on India’s resources and its institutions (majorly Legislatures and Judiciary) as well. The legal system is one such very prominent institution and is no exception to this, since time and again different kinds of views and different kinds of issues are raised and the judiciary being the third pillar tries to answer each different scenarios in an effective way.

But, however there has been a numerous number of backlog of cases, which judiciary with the help of legislatures tries to dispose off. But comparatively India still has a long way to go, but will undoubtedly get there at some point of time. Considering the past 3 years, legislatures taking into consideration the status of the judiciary and the amount of backlog of cases comparatively more civil disputes, has enacted “The Commercial Courts, Commercial Division and Commercial Appellate Division of High Courts Act, 2015”, which is popularly known as “Commercial Courts Act”. Along with this, legislatures time and again amending the Arbitration and Conciliation Act, 1996 because of the primary reason, many people opt for ADR in order resolve their disputes amicably by way of adopting any one mechanism of Alternative dispute resolution.

In 2018, Legislature took one big head to place an amendment to Section 12 of the Commercial Courts Act, that is Section 12A (1) “…a suit which does not contemplate any urgent relief under this Act, shall not be instituted unless the plaintiff exhausts the remedy of pre-institution mediation and settlement in accordance with such manner and procedure as may be prescribed by rules made by the central government”.[14]

But the biggest question is that, is India really capable of resolving the commercial disputes by way of mediation? Are we given which sophisticated mediators? Because looking at, Section 2 (c) of the Commercial courts Act, defines the term “Commercial Dispute” and it includes very big list of 22 items, it includes matters that requires separate skill and knowledge over the subjects such as “intellectual property rights relating to registration and non-registration of all sort of IP matters; technology development agreement and technology law disputes; etc.”, but, do we have well equipped mediators to resolve such disputes through mediation process, is the pondering question that have to be addressed by the legislatures.

A perusal at the backlog of cases highlight that, “over 2.67 crore cases are pending in almost 17,000 subordinate courts across the country of which 22.62 lakh cases are pending for more than 10 years”[15], so it is appreciable that the introduction of Section 12A which mandates that the parties should have first resolved the dispute through mediation process before instituting the case in the court under the commercial courts act, but the effectiveness and the implementation of the amendment are possible only after taking into the practical difficulties.

Backdrop Of Commercial Mediation

Interest in use of mediation to resolve commercial disputes is increasing. In the words of Joseph Grynbaum once pointed out that, “An ounce of mediation is worth a pound of arbitration and a ton of litigation”, so considering mediation and mandating it in the commercial disputes is an important key stone in resolving the disputes amicably between the parties. There are numerous reasons explaining the growth of commercial mediation.

Firstly, there is a perception among businesses, whether or not true, that litigation is expensive and protracted and that the expense of litigation compares unfavourably with the cost of mediation[16].

Secondly, some business disputants who have used arbitration are less than pleased with the results. “Arbitration is the form of Alternative dispute resolution that most closely resembles trial”[17]. As such, it is slow and expensive. Indeed, recent reforms in arbitration have called for enhanced discovery and pre-trial processes and have caused disputants to complain that arbitration is becoming little different than going to court.

Thirdly, many disputants prefer mediation because it permits a degree of party control unavailable in either litigation or arbitration. Rather than let a third party such as an arbitrator or judge “decide” their dispute, parties increasingly feel better about retaining control over their own dispute through mediation.

Fourthly, “there exists enhanced awareness of an “order” to disputing alternatives. Many firms are quite prepared to litigate or arbitrate but first want to try negotiate to resolve their disputes and if negotiation does not succeed, attempt mediation. This line of reasoning suggests that a comparatively inexpensive round of mediation should be routinely sought prior to the more formal, expensive disputing options such as litigation or arbitration”.[18] Therefore, this reasoning supports the “two step ADR clause”, that requires the parties to first mediate and if unsuccessful, to arbitrate will be a safe clause and if parties get successful in the first step itself they are more of “Win-Win” situation. Perhaps more than any other factors the comparative in expense and non-adjudicative nature of mediation are its present selling points.

Nowadays, it is the usual trend of the counsels, “We might as well take a chance at resolving this dispute through mediation. In mediation we won’t spend much money and will not stuck with an undesirable result we dislike. The only results in mediation will be negotiated agreements that each party desires. So it’s better that we get negotiated by way of mediation”.[19]

So, Commercial disputes are often between parties who have had long-term relationships. For example disputes between bank lenders and borrowers, product suppliers and buyers, builders and building customers and licensee-licensor. Commercial dispute has the potential to destroy a business relationship. Disputing procedures that are “hot” such as litigation and arbitration have the potential to be adversarial and acrimonious. In contrast, disputing procedure that are “cool”, such as mediation and negotiation, may be perceived as more cooperative and less contentious means of resolving a dispute, in order to smoothen the relationship between the parties for the better outcomes. Mediation is culturally “in” as a tool to resolve business disputes between firms who share a relationship.

Mediation of “relational” disputes can, if successful, avoid the termination of the relationship and allow it to continue. Mediation of a relational business dispute can also reform or change the relationship to take into account the problem that caused the dispute”.[20] In this way commercial mediation can go beyond the instant dispute and transform the relationship of the disputants. This ability to recreate and redirect a business relationship has such strong possibilities that many firms now include pre-dispute mediation clause in their relational contracts and the step that has been taken by the legislatures to mandate for the commercial mediation will stand as an important milestone and worth introducing such mandatory clause with respect to present day conflicts.

Some commercial mediation occurs outside the relational context. Professor Ian Macneil has theorized two basic types of contracts, “relational contracts” between two persons or entities that have a long term, ongoing relationship and “transactional contracts” between individuals or entities that lack a long-term relationship and share only a unique or random contractual partnership”.[21]

So, in either of the contractual nature, the primary requirement or the sordid prerequisite to resolve the disputes in a most amicable situation with a win-win chance could be the introduction of pre-institution mediation clauses, which the legislatures have initiated in a robust motive.

Pre-Institution Mediation Vis-À-Vis Opt-Out Model

Opt-out model is one of the famous model of resolving disputes in limited civil and commercial disputes, which is introduced by the Italian legislatures[22] and it is proving to be one of the most effective way of resolving disputes through mediation in commercial disputes.[23] Under that opt-out model, “The litigants cannot approach the Italian Courts, unless and until if they can prove that they have attended an initial mediation session and that being not successful”, unless this being the reason the court will then entertain the matters.

Italy being the poster-child of this model, Indian legislatures got inspired by this model only, the reason for its success is that, “certain category of commercial cases which requires high amount of skilled mediators are authorised at various levels with numbers of mediators at each level for each dispute including the Chambers of commerce as an institution to get the commercial disputes resolved in a more effective way”. It is evident that over 20,00,000 cases were referred for the mediation under this opt-out model and out of which 70% cases resulted in positive sign[24].

But however, the sordid understanding of this effectiveness of the model is because of the Italian government or any other country which follows this model such as United Kingdom, Greece, Turkey etc have their own mediation policy with respect to this particular model for resolving disputes. This mediator policy will mandate the mediators’ qualification and requires high skill and experience to resolve the commercial disputes.

The Italian mediators policy or any other country mentioned above requires the mediators to attend separate training in order to pursue as a mediator[25] with respect to these kind of cases. But in India such mediators qualification[26] or any other such preliminary conditions lacks very abruptly. Even though mediators policy or any kind of mandatory requirements which is imposed will be in the nature of non-binding on the mediators, because of the sole reason that the Supreme Court in the case of Salem Advocates Bar Association, Tamil Nadu v. Union of India[27], held that “these guidelines are non-binding in nature”. So this makes the situation and the amendment even more non-effective.

Is India Really Ready For The Pre-Mature Step?

According to the author, to make this amendment more effective and efficacious, it is in the hands of the mediators to be more intellectual, participative and effective in resolving the disputes, because the courts’ doors are always open if the mediation does not work out for parties, but however such statement gives the relaxation to the mediators to take the matters very lightly and pay no strict attention to the disputes.

To make this amendment more successful and valuable, “an effective mediation policy should be drafted along with proper administrative style to ensure that parties are not burdened with poor mediating style and unnecessarily delay from the justice and from the process also”, so an effective mediation policy have to be drafted along with this amendment.

But however, this amendment under Section 12A (2) points out that, “the central government may, by notification authorise the authorities constituted under the Legal Service Authorities Act, 1987, for the purpose of pre-institution mediation”, however this particular amendment creates or shatters the fruitfulness of the Section 12A (1), because of two important reasons:

  1. Firstly, the Legal Service Authorities are constituted primarily to provide “free and competent legal service to weaker sections of the society”, this being the primary motive, the three levels of the Legal Service Authorities such as National, State and District legal services authorities are already overburdened with this objective of providing feel legal services.
  2. This Legal Service Authorities help these poor and weaker sections of the society with respect to civil disputes especially property matters and compensation cases. However extending this arm to commercial disputes is such a threat to the section 12A (1), because this amendment requires these people to possess high skill and intellectual to deal with the commercial matters and it is already pointed out by the author that the definition of the commercial disputes includes matters of intellectual property rights and various other technology law matters and so on, so extending the arm and over burdening the legal services authorities will definitely result in the destroying the aim and the fruitfulness of the pre-institution mediation concept.
  3. Secondly, Section 22A of the Legal Service Authorities Act, highlights on the “Pre-litigation Conciliation and Settlement through Permanent Lok Adalat”, however pursuing this provision, it is mainly deals with public utility services, so extending their roles towards the commercial matters creates an photo-frame disadvantage to the effectiveness nature of the pre-institution mediation.

So, the authorities under the Legal Services Authorities Act are not the appropriate medium to extend their role in commercial matters, (because of the reasons that commercial matters requires utmost skill and experience) envisioned by amendment to the commercial courts Act. Only the trained, experienced and skilled mediators with proper decoding their intelligence in the commercial matters can only manage commercial disputes and this idea will lead to the success of the amendment to the Commercial Courts Act.


The legislatures have initiated with this striking amendment at the right time looking at the number of pending cases[28] on side but have failed to take into consideration, to legislate on the mediators’ policies and regulations, which is the sole crux behind this idea of initiating pre-institution mediation/ opt-out model.

To put it under photo-frame point, “unless and until the legislature comes up with the mediators’ policy, the fruitfulness of the amendment is still under dormant situation only”. s

The parties must request the concerned mediators same like what is been done in arbitration, that is the parties fail to fix up the arbitrator, the Chief Justice or the any person or institution designated by him of the concerned jurisdiction are allowed to fix up the arbitrator. Likewise the parties should be mandated to file a petition for the “Well qualified, Skilled and Experienced Mediator accredited by the Ministry of Law and Justice”.

Therefore, the advantageous of this model of resolving pending cases, have to be taken into consideration very seriously and the legislatures or even the judiciary should laid down the guidelines for this amendment to enhance the essence of this amendment.

“We Want To Change, We Want To See, We Can”


  1. Pradeep Thakur, Over 10 lakh cases pending in High Courts for over 10 years, Times of India, March 26, 2018, at (Dec 11, 2018, 9:15pm)
  2. Alexander Nadja, Global Trends In Mediation, 3-4 (2ed. Kluwer Law International, 2006).
  3. F.E.A. Sander & R.R. Wheeler, The Pound Conference: Perspectives On Justice In The Future, 111-112 (St. Paul: West Publishing Co, 1979).
  4. Id.
  5. Alexander Nadja supra note 2.
  6. James J. Alfini, Sharon B. Press & Jean R. Sternlight, Mediation Theory And Practice, 82 (2nd ed. Lexis Nexis, 2010)
  7. Alexander Nadja supra note 5.
  8. R.B. Bush, Defining quality in dispute resolution, 335 Denver University Law Review (1989).
  9. Id.
  10. Alexander Nadja supra note 7.
  11. Id.
  12. Id.
  13. James J. Alfini, Supra note 6.
  14. The Commercial courts, Commercial division and Commercial Appellate Division of High Courts (Amendment) Act, 2018, Ministry Of Law And Justice (August 20, 2018, 8:17pm),
  15. Pradeep Thakur, Over 10 lakh cases pending in High Courts for over 10 years, Times of India, (March 26, 2018), at (Dec 11, 2018, 9:15pm)
  16. Mark V.B. Partridge, Alternative Dispute Resolution, 401 (Oxford University Press, 1st ed. 2009).
  17. Id.
  18. Stephen B Goldberg, Dispute Resolution : Negotiation, Mediation, And Other Processes, 406 (Wolters Kluwer Law & Business; 6th ed. 2012)
  19. Mark V.B. Partridge, supra note 16.
  20. Stephen B Goldberg, supra note 18.
  21. Ian R. Macnil, The Many Futures of Contracts, 692 Southern California Law Review 720 (1973-1974).
  22. Giuseppe Conte, The Italian Way of Mediation, 180 Year Book On Arbitration & Mediation, 188 (2014).
  23. Petros Zourdoumis, Who is opposing the Italian “opt-out” model in mediation and why?, Online Dispute Resolution Europe (30th Jan, 2016, 10:33pm),
  24. Chitra Narayan, Pre-litigation mediation is an important step to improve the ease of doing business, The Hindu June 1, 2018, at (Dec 14, 2018, 4:55pm)
  25. Antonello Miranda, Mediation In Europe At The Cross-Road Of Different Legal Cultures, 33 (1st ed.2014), [Co-founded by the European Union]
  26. Rashika Narain & Abhinav Sankaranarayanan, Formulating A Model Legislative Framework For Mediation In India, 1 Nujs Law Review 17 (2018).
  27. Salem Advocates Bar Association, Tamil Nadu v. Union of India AIR 2005 SC 3353
  28. Supra note 1.


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Backdrop Of Commercial Mediation: Is India Really Ready For The Mandatory Pre-Institution Mediation In Commercial Matters?

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