Settlements and Mediation Before Court Proceedings Under the Commercial Courts Act

Introduction

A commercial dispute arises when businesses disagree over transactions, often involving high risks and requiring court involvement. However, resolving such disputes through settlements and mediation, under the guidance of a high court lawyer, is a more cost-effective and efficient solution. This document outlines the procedures, categories, and potential outcomes of settlements and mediation under the Commercial Courts Act, 2015.

Categories of Commercial Disputes

Commercial disputes can be classified into the following categories, encompassing both domestic and international transactions, involving individuals or institutions:

1. Partnership Disputes
2. Contractual Agreements
3. Employee-Employer Disputes
4. Customer Disputes
5. Shareholder Disputes

Note: Disputes involving a monetary value exceeding INR 3,00,000 (Rupees Three Lakhs Only) are adjudicated by Commercial Courts.

Definition of a Commercial Dispute

As defined under Section 2(C) of the Commercial Courts Act, 2015, disputes may arise from transactions involving traders, merchants, bankers, financiers, and businesses. Examples include:

●       Export-Import Transactions

●       Admiralty and Marine Law Issues

●       Aviation Sector Transactions

●       Carriage of Goods

●       Infrastructure Contracts

●       Agreements for Trade-Related Immovable Property

●       Franchising and Licensing Agreements

●       Joint Ventures and Shareholder Agreements

●       Intellectual Property Disputes

●       Insurance and Reinsurance Issues

●       Natural Resources Exploitation

●       Business Conflicts Notified by the Central Government

Pre-institutional Mediation and Settlement

Under Section 12A of the Commercial Courts Act, pre-institution mediation is mandatory for most commercial disputes. It aims to resolve conflicts before initiating formal court proceedings.

Key Features of Pre-Institution Mediation

1. Mediation Fee: A one-time fee is paid by the disputing parties, calculated based on the claim amount.
2. Exception: Urgent relief cases can bypass pre-institution mediation under Section 12A(1).
3. Time Frame: Mediation must be completed within three months, extendable by two additional months.

Steps in Mediation

1. Issuing a Legal Notice: The aggrieved party must issue a legal notice to the opposing party, outlining the dispute.
2. Mediation Process:

○       Parties participate in structured discussions led by a neutral mediator.

○       When a settlement is reached, it is documented and signed by both parties as well as the mediator. This agreement is enforceable as an arbitral award under Section 30(4) of the Arbitration and Conciliation Act, 1996.

3. Mediation Outcomes:

○       Resolution: A binding settlement has been reached.

○       Non-Resolution: Mediation fails, and the dispute goes to court.

○       Non-Participation: A "non-starter" report is issued if a party fails to participate without a valid reason.

Benefits of Mediation

1. Cost-Effectiveness: Avoids expensive court proceedings.
2. Time Efficiency: Saves time compared to litigation.
3. Amicable Resolution: Preserves business relationships.
4. Binding Agreements: Settlements are legally enforceable.

Challenges in Mediation

India’s approach to non-participation is lenient, often resulting in unresolved disputes. Studies from Karnataka (July 2018 - March 2020) reveal over 50% of mediation applications were non-starters. Comparatively, jurisdictions like Australia impose fines for non-participation, as seen in Superior IP International Pty Ltd v. Ahearn Fox Patent and Trade Mark Attorneys.

Appealing Commercial Court Orders

1. Subordinate Courts: Appeals must be filed within 60 days in the Commercial Appellate Court.
2. District Courts or High Courts: Appeals are made to the Commercial Appellate Division of the High Court within 60 days.

Efforts are made to dispose of appeals within six months.

Conclusion

Commercial disputes can be costly and time-consuming. Pre-institution mediation offers an effective alternative to resolving conflicts amicably. Engaging a skilled lawyer provides thorough assessment, careful negotiation, and legal rights protection. The importance of professional guidance cannot be ignored, whether you plan to settle your dispute or take legal action.