‘Mediation’ And ‘Conciliation’ Can Be Used Interchangeably in India – Moorings, If Any, Of This Narrative (Part 2)

As detailed in the previous post, the narrative that there is not much awareness about mediation has held back mediation in India, coupled with calling mediation an ADR mechanism. However, damage has been done to mediation in India by another narrative i.e., in India, there is no difference between conciliation and mediation, that they are one and the same, and that, they can be used interchangeably.

This piece shall endeavour to answer the second question in the previous post i.e., does Indian law (statutory and case law) differentiate between conciliation and mediation.

Mediation in the context of The Arbitration and Conciliation Act, 1996

Section 30 of The Arbitration and Conciliation Act, 1996 (1996 Act), in essence, provides that:

(i) An arbitration agreement does not preclude an arbitral tribunal to encourage settlement of the dispute.

(ii) If the parties agree, the arbitral tribunal may use mediation, conciliation or other procedures, at any time during the arbitral proceedings to encourage settlement.

Interestingly, Section 30 of 1996 Act distinctly refers to mediation and conciliation. It is evident that 1996 Act does not intend to use the words ‘mediation’ and ‘conciliation’ interchangeably. In fact, 1996 Act has an entire part dedicated to conciliation i.e., Part III, which is on the lines of  UNCITRAL Conciliation Rules (Conciliation Rules). Conciliation Rules are of 1980. Pertinently, 1980 Rules do not even contain the word ‘mediation’. 1996 Act does not apply to mediation, barring when it is used by the arbitrator/arbitral tribunal during the arbitral proceedings to encourage settlement. This aspect has been briefly dealt with in the summary of this piece.

Mediation in the context of The Code of Civil Procedure, 1908

In the year 1999, Section 89 was inserted in The Code of Civil Procedure, 1908 (CPC). Section 89(1) of CPC mandates that:

(i) Where it appears to the court that there exist elements of a settlement which may be acceptable to the parties;

(ii) the court shall formulate the terms of settlement and give them to the parties for their observations.

(iii) After receiving their observations, the court may reformulate the terms of a possible settlement and refer the same for –

(a) arbitration;

(b) conciliation;

(c) judicial settlement including settlement through Lok Adalat; or

(d) mediation.

Section 89 of CPC distinctly refers to mediation as well as conciliation. It is evident that CPC does not intend to use the words ‘mediation’ and ‘conciliation’ interchangeably.

As per Section 89(2)(a) of CPC, where a dispute has been referred either for arbitration or for conciliation, the provisions of 1996 Act shall apply as if the proceedings for arbitration or conciliation were referred for settlement under the provisions of 1996 Act. It follows as a logical corollary that if the referral is for conciliation, it shall be governed by 1996 Act.

As per Section 89(2)(d) of CPC, where a dispute has been referred for mediation, the court shall effect a compromise between the parties and it shall follow such procedure as may be prescribed. It transpires that where a dispute has been referred for mediation, what the court is required to do is to effect a compromise between the parties and in doing so, it shall follow such procedure as may be prescribed.

1996 Act and CPC clearly signal that mediation and conciliation are distinct and different. I wonder, if the narrative under scrutiny in this piece ever had any moorings.

Mediation and case law

Two judgments of Hon’ble Supreme Court of India (Supreme Court) which are of defining importance for mediation in India are:

(i) Salem Advocate Bar Association, T.N. versus Union of India (Salem II) ((2005) 6 SCC 344)

(ii) Afcons Infrastructure Limited and another versus Cherian Varkey Construction Company Private Limited and others (Afcons) ((2010) 8 SCC 24)

Mediation in the context of Salem II

Some amendments were made to CPC by Amendment Acts of 1999 and 2002, including the insertion of Section 89. The constitutional validity of these amendments were challenged. The challenge was rejected by Supreme Court vide its judgment in Salem Advocate Bar Association, T.N. versus Union of India (Salem I) ((2003) 1 SCC 49). While rejecting the challenge, Supreme Court noticed that modalities have to be formulated for the manner in which inter alia Section 89 of CPC may have to be operated.

For this purpose, a committee headed by a former Judge of Supreme Court and then Chairman, Law Commission of India, Justice M. Jagannadha Rao (Committee) was constituted. It was constituted to ensure that these amendments become effective and result in quicker dispensation of justice. It was also observed that Committee may consider devising inter alia rules and regulations which should be followed while taking recourse to the ADR mechanisms referred to in Section 89 of CPC. In Salem II, Supreme Court went on to observe that the model rules devised by Committee, with or without modification, which are formulated, may be adopted by the High Courts concerned for giving effect to Section 89(2)(d) of CPC. This background can be culled out from para. 1 of Salem II, as reported in (2005) 6 SCC 344.

In para. 61 of Salem II, as reported in (2005) 6 SCC 344, Supreme Court has observed that it seems clear from Committee’s report that while drafting the model rules, after examining the Mediation Rules in various countries, a fine distinction is tried to be maintained between conciliation and mediation, accepting the views expressed by the British author Mr. Brown in his work on India that in conciliation there is a little more latitude and a conciliator can suggest some terms of settlement too. It would be useful to refer to what Henry J. Brown and Arthur L. Mariot have to say in this regard, which was accepted by Committee in its report and also by Supreme Court in para. 61 of Salem II, as reported in (2005) 6 SCC 344:

“In their celebrated book ‘ADR Principles and Practice’ by Henry J. Brown and Arthur L. Mariot (1997, 2nd Ed. Sweet & Maxwell, Lord on Chapter 7, p 127), the authors say that ‘mediation’ is a facilitative process in which “disputing parties engage the assistance of an impartial third party, the mediator, who helps them to try to arrive at an agreed resolution of their dispute. The mediator has no authority to make any decisions that are binding on them, but uses certain procedures, techniques and skills to help them to negotiate an agreed resolution of their dispute without adjudication.””

Furthermore, Committee’s report makes it clear that:

“Brown quotes (at p 127) the 1997 Handbook of the City Disputes Panel, UK which offers a range of dispute resolution processes, facilitative, evaluative and adjudicative. It is there stated that conciliation “is a process in which the Conciliator plays a proactive role to bring about a settlement” and mediator is “a more passive process”.”

Additionally, Committee’s report goes on to clarify that:

“This is the position in India, UK and under UNCITRAL model. However, in the USA, the person having the pro-active role is called a ‘mediator’ rather than a ‘conciliator’. Brown says (p 272) that the term ‘Conciliation’ which was more widely used in the 1970s has, in the 1970s, in many other fields given way to the term ‘mediation’. These terms are elsewhere often used interchangeably.”

The aforesaid observations of Supreme Court rattle the narrative that in India, mediation and conciliation are one and the same, which narrative in any case has no moorings. At this juncture, on account of the following reasons, I find it necessary to go back to the draft rules made by Committee:

(i) Mediation rules prevailing in India are largely modelled on the lines of the final rules which emerged from these draft rules.

(ii) The definition of mediation as per the final rules is radically different from what flows from Section 89(2)(d) of CPC and Supreme Court went on to adopt the said definition.

The draft rules made by Committee were circulated to High Courts, subordinate courts, Bar Council of India, State Bar Councils and Bar Associations, seeking their responses. Subsequently, the draft rules were finalised by Committee, as it emerges upon perusing Civil Procedure Alternative Dispute Resolution and Mediation Rules, 2003 (ADR Rules), which are the final rules framed by Committee, in modification of the draft rules circulated earlier after considering the responses from various stakeholders. The said position can be deduced from para. 64 of Salem II, as reported in (2005) 6 SCC 344. ADR Rules are contained in Salem II. In this regard, page 379 of Salem II, as reported in (2005) 6 SCC 344, may be perused.

Supreme Court directed that it is for the respective High Courts to take appropriate steps for making rules in exercise of rule-making power subject to modifications, if any, which may be considered relevant. The said position can be culled out from para. 64 of Salem II, as reported in (2005) 6 SCC 344.

Part II of ADR Rules is titled Civil Procedure Mediation Rules (Mediation Rules). ADR Rules have been adopted by various High Courts, with some or nil modification in exercise of the rule-making power under Part X of CPC and Section 89(2)(d) of CPC. (See Sriram Panchu, Mediation Practice & Law The Path to Successful Dispute Resolution, Second Edition, 2015, Lexis Nexis at page 312).

It is obvious that ADR Rules are not legislative in nature, as they are a framework designed by Committee in report. However, the definition of mediation as per ADR Rules is radically different from what flows from Section 89(2)(d) of CPC. However, in Salem II, Supreme Court adopted the definition of mediation contained in ADR Rules, which is as under:

“Settlement by ‘mediation’ means the process by which a mediator appointed by parties or by the court, as the case may be, mediates the dispute between the parties to the suit by the application of the provisions of Mediation Rules, and in particular, by facilitating discussion between the parties directly or by communicating with each other through the mediator, by assisting parties in identifying issues, reducing misunderstandings, clarifying priorities, exploring areas of compromise, generating options in an attempt to solve the dispute and emphasising that it is the parties’ own responsibility for making decisions which affect them.”

(See Rule 4 of ADR Rules, page 381 of Salem II, as reported in (2005) 6 SCC 344)

Rule 4(v) of ADR Rules says in as many words that the role of a conciliator is greater than that of a mediator. (See page 381 of Salem II, as reported in (2005) 6 SCC 344)

In fact, in relation to conciliation, ADR Rules are to the effect that:

“Settlement by ‘conciliation’ means the process by which a conciliator who is appointed by parties or by the court, as the case may be, conciliates the dispute between the parties to the suit by the application of the provisions of 1996 Act insofar as they relate to conciliation, and in particular, in exercise of his powers under Sections 67 and 73 of 1996 Act, by making proposals for a settlement of the dispute and by formulating or reformulating the terms of a possible settlement; and has a greater role than a mediator.”

(See Rule 4 of ADR Rules, page 381 of Salem II as reported in (2005) 6 SCC 344)

The narrative that in India, mediation and conciliation are one and the same, is a stark deviation from the law of the land laid down by Supreme Court in Salem IISalem II differentiates between conciliation and mediation, beyond any doubt.

Thus, the second question posed in the previous post stands answered in the affirmative. In view of the same, the narrative under scrutiny in this piece stands demolished.

However, my exploration would be incomplete without examining Afcons. In fact, the process of examining Afcons is indispensable to answer the third question framed in the previous post. Having answered the second question in the previous post in the affirmative, this piece shall now endeavour to answer the third question in the previous post i.e., what is the legal framework which applies to mediation in India.

In the process of answering this question, I shall also endeavour to dispel a myth. It is a myth that in Afcons, Supreme Court has laid down that the term ‘mediation’ is a synonym of the term ‘conciliation’. In fact, once this myth is busted, the legal framework which applies to mediation in India shall become as clear as daylight.

Mediation in the context of Afcons

In para. 23 of Afcons, as reported in (2010) 8 SCC 24, Supreme Court recognised the fact that all over India the courts have been referring cases under Section 89 of CPC to mediation by assuming and understanding mediation to mean a dispute resolution process by negotiated settlement with the assistance of a neutral third party.

Para. 12 of Afcons, as reported in (2010) 8 SCC 24, hints that the term ‘mediation’ is a synonym of the term ‘conciliation’. Let us take a look at the said para.:

““Judicial settlement” is a term in vogue in USA referring to a settlement of a civil case with the help of a Judge who is not assigned to adjudicate upon the dispute. “Mediation” is also a well-known term and it refers to a method of non-binding dispute resolution with the assistance of a neutral third party who tries to help the disputing parties to arrive at a negotiated settlement. It is also a synonym of the term “conciliation”. (See Black’s Law Dictionary, 7th Ed., pp. 1377 and 996.)”

Probably, it is this para. in Afcons, which presents moorings to the narrative under scrutiny in this piece. By no stretch of imagination can it be said that in Afcons, Supreme Court has laid down that mediation is a synonym of conciliation, because, the reasons given in Afcons are not merely contrary but also very compelling. In view of the same, the hint in Afcons that the term ‘mediation’ is a synonym of the term ‘conciliation’ needs to be ignored. There are a host of reasons to do so, which can be culled out from Afcons. The reasons are:

(i) Supreme Court interchanged the word ‘mediation’ in Section 89(2)(d) of CPC with the words ‘judicial settlement’ in Section 89(2)(c) of CPC, to correct the draftsman’s error in Section 89 of CPC. This position emerges from paras. 13 and 25 of Afcons, as reported in (2010) 8 SCC 24.

(ii) Para. 25 of Afcons, , as reported in (2010) 8 SCC 24, demonstrates that Section 89(2)(c) and (d) of CPC read as under when the two terms are interchanged:

Section 89(2)(c) – Where a dispute has been referred for mediation, the court shall refer the same to a suitable institution or person and such institution or person shall be deemed to be a Lok Adalat and all the provisions of The Legal Services Authorities Act, 1987 (LSA) shall apply as if the dispute were referred to a Lok Adalat under the provisions of LSA.

Section 89(2)(d) – Where a dispute has been referred for judicial settlement, the court shall effect a compromise between the parties and shall follow such procedure as may be prescribed.

In this context, para. 25 of Afcons, as reported in (2010) 8 SCC 24, is significant. It clarifies that these changes shall remain in force till the legislature corrects the mistakes, so that Section 89 of CPC is not rendered meaningless and infructuous. The legislature has not yet corrected the mistakes.

If mediation and conciliation were to be read synonymously, then, a conciliator shall be deemed to be a Lok Adalat and all the provisions of LSA shall apply as if the dispute were referred to a Lok Adalat under the provisions of LSA. That can never be the case, because, Part III of 1996 Act comprehensively covers conciliation.

(iii) As per para. 29 of Afcons, as reported in (2010) 8 SCC 24, Section 89 of CPC lays down that:

(a) Arbitration and conciliation will be governed by 1996 Act.

(b) Lok Adalat settlement and mediation will be governed by LSA.

(c) Judicial settlement will not be governed by any enactment and the court will follow such procedure as may be prescribed by appropriate rules.

In this para., Supreme Court has unequivocally laid down that conciliation will be governed by 1996 Act and mediation will be governed by LSA. Therefore, there exists no scope to deduce that mediation is synonymous to conciliation.

(iv) As per para. 36 of Afcons, as reported in (2010) 8 SCC 24, arbitration or conciliation requires consent of all parties. Supreme Court has laid down that if the parties are not agreeable to arbitration or conciliation, the court has to consider which of the other three ADR processes (Lok Adalat, mediation and judicial settlement) which do not require the consent of parties for reference, is suitable and appropriate, and refer the parties to such ADR process. In para. 36 of Afcons, as reported in (2010) 8 SCC 24, Supreme Court has gone to the extent of laying down that if the suit is complicated or lengthy, mediation will be the recognised choice. This post deals with the kind of cases which are suitable for mediation,

Para. 36 of Afcons, as reported in (2010) 8 SCC 24, mandates that reference to conciliation requires consent of all parties, whereas, reference to mediation does not require consent of all parties. Thus, there is no question of using mediation and conciliation synonymously.  This post deals with non-consensual nature of referral to mediation.

(v) In para. 38 of Afcons, as reported in (2010) 8 SCC 24, Supreme Court has reaffirmed that when a matter is settled through conciliation, the settlement agreement is enforceable as if it is a decree of the court having regard to Section 74 read with Section 30 of 1996 Act. However, Supreme Court has, in this para., clarified the following:

(a) The settlement agreement in a conciliation may not require the court’s seal of approval for its enforcement, when it is made in a direct reference by the parties without the court’s intervention. However, the position will be different if it is made on a reference by a court in a pending suit/proceedings.

(b) The court continues to retain control and jurisdiction over the cases which it refers to conciliation, hence, the settlement agreement in conciliation or the Lok Adalat award will have to be placed before the court for recording it and disposal in its terms.

(vi) Interestingly, para. 39 of Afcons, as reported in (2010) 8 SCC 24, provides that where the reference is to a neutral party i.e., mediation on a court-reference, it will be deemed to be a reference to Lok Adalat. However, as the court retains its control and jurisdiction over the matter, the mediation settlement will have to be placed before the court for recording the settlement and disposal.

(vii) Para. 40 of Afcons, as reported in (2010) 8 SCC 24, provides that whenever such settlements reached before non-adjudicatory ADR fora are placed before the court, the court should apply the principles of Order XXIII Rule 3 of CPC (Compromise of suit) and make a decree/order in terms of the settlement, in regard to the subject-matter of the suit/proceeding. In regard to matters/disputes which are not the subject-matter of the suit/proceedings, the court will have to direct that the settlement shall be governed by Section 74 of 1996 Act (in respect of conciliation settlements) or Section 21 of LSA (in respect of settlements by a Lok Adalat or a mediator). Very crucially, the said para. provides that only then such settlements will be effective.

Conclusion

Indian law (statutory and case law) differentiates between conciliation and mediation. The narrative that they can be used interchangeably could have never had any moorings.

In any case, Afcons does not render mediation as a synonym to conciliation. Thus, if at all the frail moorings presented to the narrative under scrutiny lie in para. 12 of Afcons, as reported in (2010) 8 SCC 24, they are of no use. Instead of anchoring the narrative, they ground it. This narrative is probably a product of desperation, in a bid to make the outcome of a private mediation enforceable as though it is a settlement agreement (which is the outcome of a conciliation).

Court-referred mediations are squarely governed by the rules made by High Courts in exercise of their rule-making power subject to modifications, if any, which may be considered relevant to ADR Rules and Mediation Rules as well as the manuals of procedure for ADR and LSA. In terms of para. 39 of Afcons, as reported in (2010) 8 SCC 24, where a dispute is referred for mediation by the court, it will be deemed to be a reference to Lok Adalat. However, as the court retains its control and jurisdiction over the matter, the mediation settlement will have to be placed before the court for recording the settlement and disposal. Para. 40 of Afcons, as reported in (2010) 8 SCC 24, stipulates that whenever such settlements reached before a mediator are placed before the court, the court should apply the principles of Order XXIII Rule 3 of CPC (Compromise of suit)  and make a decree/order in terms of the settlement, in regard to the subject-matter of the suit/proceedings. The court will have to direct that such a settlement shall be governed by Section 21 of LSA.

Are mediations arising in an arbitration squarely governed by 1996 Act? What about private mediation i.e., mediations beyond the realm of court-referred mediations? The said aspects have been explored in this piece. The stand taken by India before UNCITRAL, in relation to mediation has been explored in this piece.

Note: Parts of this piece are inspired by this author’s piece titled Companies (Mediation and Conciliation) Rules, 2016 – “Giant Leap” or “Achilles Heel” for mediation in India (http://www.livelaw.in/companies-mediation-conciliation-rules-2016-giant-leap-achilles-heel-mediation-india/)

24 Replies to “‘Mediation’ And ‘Conciliation’ Can Be Used Interchangeably in India – Moorings, If Any, Of This Narrative (Part 2)”

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