Pre- Litigation Mediation- Legal Angle

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Companies prefer Pre-Litigation over Mediation

Mediation is a form of Alternate Dispute Resolution (ADR) which is more popularized in the contemporary world as the companies are preferably opting it. The main advantage of choosing any ADR mechanism is it is party autonomous and in most of the cases it leads to the win- win situation. Even the judges are encouraging these alternative disputes mechanisms as they help in saving the resources of the court. Companies are choosing pre- litigation mediation than force majeure as this greatly serve the purpose by lessening the time period and save costs compared to litigation.

Force majeure is a clause generally used in the business contracts which means, if any unforeseen circumstances arises without the intervention of parties, then the parties of the contract are not obliged to perform such contract, if they can prove the that the incident happened will come under the force majeure which is also known as Doctrine of frustration in common law. In the Indian scenario it hasn’t been expressed properly under any particular law but the concept of this is explained under section 56 of Indian Contract Act, 1872 as follow[1]

“Contract to do act afterwards becoming impossible or unlawful.—A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.1 —A contract to do an act which, after the contract is made, becomes impossible, or, by reason of some event which the promisor could not prevent, unlawful, becomes void when the act becomes impossible or unlawful.”

Compensation for loss through non-performance of act known to be impossible or unlawful.—Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise. —Where one person has promised to do something which he knew, or, with reasonable diligence, might have known, and which the promisee did not know, to be impossible or unlawful, such promisor must make compensation to such promisee for any loss which such promisee sustains through the non-performance of the promise.”

Some of the major corporate firms are starting the pre litigation mediation in the present scenario of pandemic as it helps them in resolving the disputes in a better way. So many clients are approaching the firms and asking to suggest the better ways to deals to with the force majeure clause for their best interest. For Example, many landlords are forcing the tenants to perform the terms of contract without even considering the present pandemic as a form of force majeure.so in the present situation pre litigation mediation became very important and The corporates can settle the disputes through pre- litigation mediation as they will get the authority under The Commercial Courts Act, 2015.  Due to the lockdown and the public safety issues and the pending litigation cases, the corporates would do far better considering the pre- litigation mediation provision.[2]

What is Mediation?

Mediation is an Alternate Dispute Resolution where a neutral intermediary acts as mediator between the two or more parties to resolve a dispute. It is an efficient and most convenient dispute resolving mechanism as it is cost effective and leads to speedy disposal of case. In most of the cases people themselves opt for mediation as it is voluntary, party autonomous and help the parties to settle dispute amicably. The mediation laws are pretty flexible and user friendly in India as anyone can act as a mediator if the two parties agree for the same. If both the parties agree for the mediation process, then they can put it on a written agreement and the judgment given can be considered as enforceable.

In India mediation is mainly private, where the parties voluntarily opt for the process of mediation but in some cases the court itself refers the parties to go for mediation and in this case, mediation is considered as mandatory under section 89 of CPC. Parties are referred to mediation in matrimonial cases mainly related to divorce. Mediation process a non-binding procedure and the party autonomous. It is an interest based mechanism and completely confidential in nature. In addition to the divorce cases many companies are naturally drawn towards the process of mediation as it keeps matters completely private.

Advantages of Mediation over Litigation

  • Cost effective when compared to the litigation
  • Helps in speedy disposal of a case
  • Completely confidential in nature
  • Settles the dispute amicably and results in a peaceful settlement
  • More flexible in nature
  • It leads to win-win situation

Doctrine of Force Majeure with respect to Covid-19

Covid-19 has huge impact on everyday life by social distancing, restricted movements and lockdown in the entire nation. The sad fact is that, it is becoming a new normal till the vaccine is invented. Major impact of pandemic is seen on Indian economy there by business related contracts. The covid-19 is an epidemic which has broken out suddenly all over the world and it has serious repercussions like restricted movement, where an individual is not able to perform his obligation related to the contract he entered. Force majeure is a clause where if an individual unable to perform a contract due to arise of any unforeseen circumstances then he is not under any obligation to perform it.  There is an exhaustive list of events which comes under the doctrine of frustration or force majeure which primarily includes Act of God, War, terrorism, Out-break of any pandemic and so on. Though Doctrine of force majeure is not specifically mentioned in Indian Law but section 32 and section 56 of Indian Contract Act envisaged the same.[3] According to Indian law, it cannot ask an individual to perform impossible act. So in the present scenario, we can consider the series of events which are happening as a part of unforeseen occurrences and it comes under the force majeure, if the situation retains for a longer time then the parties of the contract can either amend the terms of the contract or can totally withdraw the contract if is considered as an impossible event to perform with in the stipulated time. There are many contracts which are not performed because of lockdown all over the country. If at all parties had a force majeure clause in their contract they can bring it into picture. If not they have a possibility of invoking section 56 of Indian Contract Act, 1872 in that scenario.[4]

Critical Analysis

Mediation is a concept which is not something new and it dates back to the Vedic period. The plain meaning of mediation is acting as a buffer between the parties, where there is a dispute around a particular thing and resolving it amicably. In India mediation got its importance after the case Salem advocate Bar Association v. U.O.I[5], in which the court held that  there are less alternate dispute mechanisms than required in India to resolve the cases. In Salem Bar Association v U.O.I (case 2)[6] in which medication came into force legally  based on obiter dicta. Later in M/S. Afcons Infra. Ltd. & Anr vs M/S Cherian Varkey case[7], the court held that a case must refer to ADR if there is a possibility and made it mandatory through Section 89 of CPC in certain type of cases. As mediation is very friendly and flexible to the parties, it got popularized in recent times not only in the family and matrimonial cases but also in the matters related to the companies as the process is very amicable and private. The only reason many people are not opting it is lack of awareness among the general public. But in the present situation many judges are encouraging the mediation as there is a dire need of resolving the pending issues in amicable way. Today many young lawyers are aspiring to become successful mediators by taking mediation as a profession. Mediation before litigation is more fruitful as it is always party autonomous and they can choose mediator who is impartial, neutral and amicable.

Conclusion

Pre mediation litigation became very common in the contemporary world, if we consider the pandemic situation where it is impossible to attend the courts because of restricted movements. The time frame that is taken for a civil litigation generally is 8 to 12 months, so with the current backlog of judiciary it is highly needed to introduce ADR mechanisms and their working to aid present litigation. Since there are many pending suits it is highly impossible to expect speedy remedy in the courts and making mediation mandatory in certain cases in a way to boost litigation.   Because of all advantages mediation became more flexible than any other type of alternate dispute mechanism. Companies are opting it more from the last decade as not only it is cost effective and time saving but also all the matters are kept in private. Pre-litigation mediation is going to be a new trend in this pandemic times as necessity is the mother of all inventions.


[1] https://economictimes.indiatimes.com/small-biz/legal/what-is-force-majeure-the-legal-term-everyone-should-know-during-covid-19-crisis/articleshow/75152196.cms?from=mdr.

[2] https://economictimes.indiatimes.com/news/company/corporate-trends/companies-prefer-pre-litigation-mediation-to-force-majeure/articleshow/75482837.cms?from=mdr.

[3] https://www.wipo.int/amc/en/mediation/what-mediation.html.

[4] http://mappingadr.in/mohit-mokal-on-pre-litigation-mediation-model-in-india/.

[5] (2003) 1 SCC 49

[6] (2005) 6 SCC 344

[7] (2010) 8 SCC 24

Written by

K. Prathyusha 

Law Student, Damodaram Sanjivayya National Law University

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