SC Judge highlights role of mediation in preserving business relationships
It is not a new concept in our system, it has always been a part of our tradition, says Justice Kotiswar Singh, stating that prolonged litigation imposes high costs on businesses; Asian Centre for International Arbitration and Mediation opens in Visakhapatnam
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Context
At the inauguration of the Asian Centre for International Arbitration and Mediation (ACIAM) in Visakhapatnam, speakers including a Supreme Court judge and an Andhra Pradesh minister highlighted the critical role of Alternative Dispute Resolution (ADR), particularly mediation, for the Micro, Small and Medium Enterprises (MSME) sector. The discussion focused on how mediation offers a faster, cost-effective, and relationship-preserving alternative to traditional court litigation, which is crucial for the financial stability and growth of over 20 lakh MSMEs in Andhra Pradesh.
UPSC Perspectives
Polity & Governance
The push for mediation reflects a broader governance reform agenda aimed at improving the Ease of Doing Business. For MSMEs, prolonged and expensive litigation is a major impediment. By promoting ADR, the government seeks to decongest courts and provide a more efficient justice delivery system. This aligns with the constitutional mandate under [Article 39A], which directs the state to ensure that the operation of the legal system promotes justice. The establishment of bodies like ACIAM is a step towards creating the institutional infrastructure for this purpose. The recent enactment of the [Mediation Act, 2023] provides a formal legal framework, mandating pre-litigation mediation for certain disputes and ensuring the enforceability of mediated settlement agreements. This shift from adversarial litigation to a more collaborative dispute resolution model is a key governance reform that UPSC aspirants should track, particularly in the context of its impact on the business environment and judicial efficiency. The article highlights how state governments, like Andhra Pradesh, are integrating this national policy direction into their own industrial and MSME promotion strategies.
Economic
From an economic perspective, the emphasis on mediation for MSMEs is a strategic intervention to enhance the sector's resilience and competitiveness. MSMEs are the backbone of the Indian economy, contributing significantly to employment and exports, yet they are highly vulnerable to financial shocks caused by commercial disputes and delayed payments. The [Micro, Small and Medium Enterprises Development Act, 2006] already provides for a dispute resolution mechanism through Micro and Small Enterprises Facilitation Councils (MSEFCs), which first attempt conciliation and can then proceed to arbitration. The article underscores that traditional litigation can destroy business relationships, whereas mediation allows for their preservation, a crucial factor in a networked economy. By reducing litigation costs and ensuring quicker settlement of dues, effective ADR mechanisms free up locked capital, improve cash flow, and allow entrepreneurs to focus on innovation and expansion rather than on legal battles. This directly contributes to a more stable and dynamic MSME ecosystem, fostering economic growth from the ground up.
Legal & Judiciary
The legal framework for ADR in India has been evolving significantly. While the [Arbitration and Conciliation Act, 1996] has long been the cornerstone for commercial arbitration, the judiciary has consistently encouraged ADR. The Supreme Court in cases like Afcons Infrastructure Ltd. v. Cherian Varkey Construction (2010) has emphasized the need for courts to refer cases to ADR. The article mentions Med-Arb (Mediation-Arbitration), a hybrid model where a neutral third party first acts as a mediator and, if no settlement is reached, proceeds to act as an arbitrator. The [Mediation Act, 2023] now solidifies the legal status of mediation, making pre-litigation mediation mandatory for many civil and commercial disputes. The Act aims to create a formal structure with trained mediators and establishes the Mediation Council of India for regulation. A key feature is that mediated settlement agreements are now legally binding and enforceable like a court decree, which addresses a previous weakness in private mediation. This robust legal backing is essential to build trust and encourage wider adoption of mediation among businesses, including MSMEs.