Solution:

Mediation under the Mediation Act, 2023 (Section 2(h)):

Mediation is a process whereby parties attempt to reach an amicable settlement of their dispute with the assistance of a third person (mediator) who does not have the authority to impose a settlement upon the parties. It includes pre-litigation mediation, online mediation, community mediation, conciliation, and similar processes.

Key Differences from Arbitration:

• Authority: In mediation, the mediator facilitates discussion but cannot impose a decision. In arbitration, the arbitrator makes a binding decision.
• Control: Parties control the outcome in mediation. In arbitration, the arbitrator controls the outcome.
• Process: Mediation is collaborative and interest-based. Arbitration is adversarial and rights-based.
• Outcome: Mediation results in a settlement agreement only if parties agree. Arbitration results in an arbitral award regardless of party agreement.
• Relationship: Mediation preserves relationships. Arbitration may strain them.

Solution:

Composition of the Mediation Council of India (Section 32):

• 1 Chairperson appointed by the Central Government
• 2 Full-Time Members with experience in mediation or ADR
• 3 Ex-Officio Members: Law Secretary, Expenditure Secretary, and one other
• 1 Part-Time Member from an industry body

Five Key Functions (Section 40):

• 1. Registration of Mediators: Establishing and maintaining a registry of qualified mediators
• 2. Recognition of Service Providers: Recognizing and grading mediation service providers and training institutes
• 3. Standard Setting: Laying down standards for professional conduct and ethics for mediators
• 4. Promotion of Mediation: Developing India as a center for domestic and international mediation
• 5. Maintaining Electronic Repository: Creating and maintaining an e-depository of mediated settlement agreements

Solution:

Community Mediation (Salishi Sabha) - Sections 43-46:

Concept:

Community mediation is a process for resolving disputes that affect the peace, harmony, and tranquility among residents or families in a locality. It represents a formalized version of traditional village Panchayat systems.

Unique Features:

• Prior Mutual Consent: Requires explicit consent of all parties before commencement
• Panel of Three Mediators: Conducted by three community mediators appointed by local authorities
• Authority Support: Organized by authorities under the Legal Services Authorities Act, 1987, or by District/Sub-Divisional Magistrates
• Community-Centric: Addresses local disputes with cultural sensitivity and community values
• Informal Approach: More flexible and accessible than formal mediation

Key Limitation:

The most significant limitation is that settlement agreements from community mediation are NOT enforceable as court judgments or decrees (Section 46(4)). They are meant to maintain peace and harmony but lack legal enforceability. Parties must honor them voluntarily.

Purpose:

Despite non-enforceability, community mediation serves the vital purpose of: (1) Preserving community harmony, (2) Preventing escalation of minor disputes, (3) Maintaining social fabric, (4) Providing accessible dispute resolution at the grassroots level

Solution:

Significance of Salem Advocate Bar Association v. Union of India (2005) 6 SCC 344:

Overall Significance:

This landmark judgment validated the constitutional amendments introducing Section 89 of CPC, which empowers courts to refer disputes to ADR mechanisms including mediation. It laid the institutional and procedural foundation for modern mediation law in India, eventually leading to the Mediation Act, 2023.

Three Key Principles Established:

1. Procedure as Handmaid to Justice:

Justice Y.K. Sabharwal emphasized that procedural law exists to serve justice, not to obstruct it. This principle justifies procedural reforms like mandatory mediation to reduce delays and provide expeditious justice.

2. Judicial Discretion and Non-Disqualification:

The Court held that judges who refer cases to mediation are not disqualified from trying the case if mediation fails. The referral decision is based on reasonable grounds for settlement, not on merits of the case.

3. Institutional Framework for ADR:

The judgment mandated creation of institutional support for mediation through: (a) Model rules and procedures, (b) Training programs for mediators and legal professionals, (c) Court-annexed mediation centers, (d) Standardized practices across High Courts

Additional Impact:

The case led to formation of the Justice M. Jagannadha Rao Committee, which drafted comprehensive ADR rules. The principles from this case directly influenced the Mediation Act, 2023, including establishment of the Mediation Council of India, registration requirements for mediators, and the framework for pre-litigation mediation.

Solution:

Mediation Process (Step-by-Step):

Step 1 - Initiation:

Parties agree to mediation voluntarily or through court referral. A mediation agreement is signed outlining the dispute, scope, and consent to mediate.

Step 2 - Appointment of Mediator:

Parties mutually select a mediator or apply to a mediation service provider for appointment. The mediator must be registered with the Mediation Council of India.

Step 3 - First Session:

Mediator explains the process, establishes ground rules, ensures confidentiality agreements, and begins dialogue.

Step 4 - Negotiation:

Parties present their positions and interests. Mediator facilitates communication through joint sessions and private caucuses, helping parties explore solutions and identify common ground.

Step 5 - Settlement or Termination:

If successful: Parties draft, review, and sign a Mediated Settlement Agreement (MSA) in the presence of the mediator. If unsuccessful: Mediation terminates, and parties may proceed to litigation or other dispute resolution.

Step 6 - Enforcement:

The MSA (except community mediation) is filed with the appropriate court and is enforceable as a court decree. Can only be challenged on grounds of fraud, corruption, impersonation, or if the dispute was not fit for mediation.

Maximum Time Frame:

• Initial Period: 120 days from the date of the first mediation session
• Extension: Additional 60 days by mutual consent of parties
• Total Maximum: 180 days (approximately 6 months)

Note: This time-bound approach ensures mediation remains efficient and does not become another source of delay. If settlement is not reached within the maximum period, parties are free to pursue litigation or other remedies.

Solution:

Suitability of Mediation:

YES, mediation is highly suitable for this dispute because:

• Relationship Preservation: Mediation is collaborative and helps preserve business relationships, which is critical for continuing partners
• Confidentiality: The dispute remains confidential, protecting business reputation and trade secrets
• Flexibility: Solutions can be creative and business-focused rather than limited to legal remedies
• Cost and Time: Mediation is faster and less expensive than litigation
• Control: Partners control the outcome rather than having a decision imposed by a court

Process to Follow:

1. Agreement to Mediate:

Both partners should sign a mediation agreement expressing their consent to resolve the dispute through mediation. This agreement should specify the scope of the dispute (profit-sharing mechanism).

2. Selection of Mediator:

Options: (a) Mutually select a mediator with expertise in commercial disputes and partnership matters, or (b) Apply to a recognized mediation service provider for appointment from their panel of registered mediators

3. Preparation:

Each partner should: (a) Gather relevant documents (partnership deed, financial records, profit-sharing agreements), (b) Identify their interests and priorities, (c) Consider possible solutions and compromises

4. Mediation Sessions:

First Session: Mediator explains confidentiality, ground rules, and process. Each partner presents their perspective on profit-sharing. Subsequent Sessions: Mediator facilitates discussion, helps identify interests (e.g., fair compensation, financial security, business growth). Private sessions (caucuses) may be held to explore positions confidentially. Creative solutions are explored (e.g., revised profit-sharing formula, performance-based distribution, future business plans)

5. Settlement:

If agreement is reached: (a) Draft a Mediated Settlement Agreement detailing the new profit-sharing arrangement, (b) Both partners and the mediator sign the agreement, (c) Agreement can be filed with court for enforceability if desired

6. Implementation:

Partners implement the agreed terms, amending the partnership deed if necessary. The MSA serves as a legally binding document.

Expected Timeline: 30-60 days for a partnership dispute of this nature.

Advantages in This Scenario:

The partners can continue working together during and after mediation. The solution can address underlying business concerns beyond just legal profit-sharing formulas. Both partners feel heard and participate in creating the solution, leading to better compliance and satisfaction.