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Pre-Institution Mediation under Commercial Courts Act, 2015 - Its Importance and Process

The Commercial Courts Act, 2015 was enacted to provide speedy and efficient resolution of commercial disputes in India. The Act established commercial courts, commercial divisions and commercial appellate divisions in various states and high courts. However, the Act also recognized the importance of alternative dispute resolution mechanisms, such as mediation, for settling commercial disputes amicably and expeditiously.

In 2018, the Act was amended to introduce Section 12A, which made pre-institution mediation mandatory for all commercial disputes of a specified value, unless the plaintiff sought urgent interim relief. Pre-institution mediation is a process of mediation that takes place before the filing of a suit in a court of law. The objective of pre-institution mediation is to facilitate the settlement of disputes without resorting to litigation, thereby saving time, money, and resources for the parties and the courts.

According to Section 12A, the pre-institution mediation shall be conducted by the authorities constituted under the Legal Services Authorities Act, 1987, which are authorized by the Central Government by notification. The Commercial Courts (Pre-Institution Mediation and Settlement) Rules, 2018 lay down the manner and procedure for pre-institution mediation. The rules prescribe the following steps for initiating and conducting pre-institution mediation:

- The plaintiff shall file an application for pre-institution mediation along with a brief summary of the dispute and the relief sought, in the prescribed form, to the authority having territorial jurisdiction over the dispute.
- The authority shall appoint a mediator from its panel within ten days of receiving the application and shall issue notice to the parties for appearance before the mediator.
- The mediator shall conduct the mediation sessions in accordance with the principles of fairness, impartiality, confidentiality and voluntariness. The mediator shall assist the parties in identifying their interests and exploring possible solutions for their dispute.
- The mediation process shall be completed within three months from the date of application, which may be extended by another two months with the consent of the parties.
- If the parties reach a settlement, they shall sign a settlement agreement along with the mediator, which shall have the same status and effect as an arbitral award on agreed terms under Section 30 (4) of the Arbitration and Conciliation Act, 1996.
- If the parties do not reach a settlement or if any party fails to appear before the mediator, the mediator shall prepare a report stating the outcome of the mediation and shall submit it to the authority.
- The plaintiff shall be entitled to institute a suit before the appropriate court after obtaining a certificate from the authority stating that no settlement could be arrived at through pre-institution mediation.

The importance of pre-institution mediation under the Commercial Courts Act cannot be overstated. It offers several benefits to the parties involved in commercial disputes, such as:

- It provides an opportunity for early resolution of disputes without escalating them into litigation.
- It reduces the burden on the courts and enhances their efficiency in dealing with other cases.
- It preserves the business relationships and goodwill between the parties by avoiding adversarial proceedings.
- It empowers the parties to control the outcome of their dispute by allowing them to design their own solutions that suit their needs and interests.
- It saves time, money, and resources for both parties by avoiding lengthy and costly litigation.

Pre-institution mediation is thus a significant highlight in the Commercial Courts Act that aims to promote a culture of settlement and harmony among commercial entities. It is hoped that more and more parties will avail of this option and benefit from its advantages.

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