Pre-Litigation Mediation

Mediation in LitigationPre-Litigation Mediation is a process by which two parties come together to settle their dispute in an amicable manner without approaching the Courts. This is achieved with the help of an impartial adjudicator. Any party can opt for mediation and strive to achieve a settlement to resolve their dispute by means of negotiations, friendly discussions and parlay to save on cost/time/energy spent on litigation and maintain the relationship with your opponent. Pre-Litigation Mediation can be sought in a gamut of disputes relating to domestic, commercial, consumer, property and minor criminal cases, etc. The process of pre-litigation mediation is mandatory for all commercial disputes under the Commercial Courts Act of 2015, arising out of :-

  1. Ordinary transactions of merchants, bankers, financiers and traders such as those relating to mercantile documents, including enforcement and interpretation of such documents;
  2. Export or import of merchandise or services;
  3. Issues relating to admiralty and maritime law;
  4. Transactions relating to aircraft, aircraft engines, aircraft equipment and helicopters, including sales, leasing and financing of the same;
  5. Carriage of goods;
  6. Construction and infrastructure contracts, including tenders;
  7. Agreements relating to immovable property used exclusively in trade or commerce;
  8. Franchising agreements;
  9. Distribution and licensing agreements;
  10. Management and consultancy agreements;
  11. Joint venture agreements;
  12. Shareholders agreements;
  13. Subscription and investment agreements pertaining to the services industry including outsourcing services and financial services;
  14. Mercantile agency and mercantile usage;
  15. Partnership agreements;
  16. Technology development agreements;
  17. Intellectual property rights relating to registered and unregistered trademarks, copyright, patent, design, domain names, geographical indications and semiconductor integrated circuits;
  18. Agreements for sale of goods or provision of services;
  19. Exploitation of oil and gas reserves or other natural resources including electromagnetic spectrum;
  20. Insurance and re-insurance;
  21. Contracts of agency relating to any of the above; and
  22. Such other commercial disputes as may be notified by the Central Government.

PLM is mandatory for cases listed above. If a party approaches the commercial court directly without PLM then the matter will be dismissed by the Court. Except in cases where the party requires “urgent interim relief”, the party is not required to go for a compulsory pre-institution mediation. However, the party approaching the Court must show the urgency in the matter. The kind of suits falling under the ambit of urgent interim relief would be, inter alia –

  • A suit concerned with an injunction on copyright infringement;
  • A suit where injunction is sought to prevent irreparable loss and injury;
  • Any such case where undergoing the compulsory mediation process would cause more harm than gain.

The choice of mediation over litigation comes easy to most people because the process is essentially an effective way to save both time and money. There are certain other advantages as well, as to why one must resort to mediation before approaching a Court of Law:

  • Confidentiality: In case of a lawsuit, every little detail, from documents placed to evidence filed becomes easily accessible to public. However, anything introduced during mediation is not easily divulged.
  • Affordable and Time Effective: Traditional lawsuits are expensive and consume way more time than a mediation process.
  • Flexible and Party-friendly: Lawsuits are controlled by the Judges who preside over cases. On the other hand, Mediation lets the parties justify themselves with greater flexibility and influence the outcome of the case with the help of effective communication and shared understanding.
  • Informal Nature: Lawsuits are cumbersome because they have to subscribe to several rules and regulatory procedures. However, mediation is much informal in nature. Moreover, the greatest benefit of the latter is that it aims to preserve the relationship between both the parties.

Here’s how a Pre-litigation Mediation under the Commercial Courts Act of 2015 can be initiated-

  1. A party has to fill the requisite application to the appropriate Authority (authorized by the Central Government, under the Legal Services Authorities Act of 1987) along with a fee of INR 1000.
  2. The said authority then sends a notice to the opposite party through RPAD asking it to appear before it within a period of 10 days, in order to give consent to participating in the mediation proceedings.
  3. A final notice is issued only upon receiving no response.
  4. The mediation process is treated to be a “non-starter” if the party either refuses to participate or fails to appear on the date fixed for the process.
  5. If both the parties consent to participate then the commercial dispute is assigned to a Mediator. A date to appear before the said Mediator is fixed and a fee for mediation shall be levied as per the quantum of claim. A one-time mediation fee is to be paid as stated hereunder :-

S. No. Quantum of Claim Mediation Fee Payable to Authority
  From Rs. 3,00,000 to Rs.10,00,000 Rs. 15,000/-
  From Rs.10,00,000 to Rs. 50,00,000 Rs. 30,000/-
  From Rs. 50,00,000 to Rs.1,00,00,000 Rs. 40,000/-
  From Rs. 1,00,00,000 to Rs.3,00,00,000 Rs. 50,000/-
  Above Rs.3,00,00,000. Rs. 75,000/-

  • It befalls upon the Authority to complete the mediation process within a period of 3 months from the date the application is received. This time frame can also be extended for further 2 months. If the mediation fails then the parties can approach the Commercial Court.

Contact us for more on how to institute a pre-litigation mediation or to initiate a commercial suit.

Author: Pankhuri Swarnim