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Enforceability of a Mediated Settlement
By Gerald Manoharan and Tanvi Kishore
J. Sagar and Associates, Bangalore

In mediation, the parties in dispute retain the right to decide for themselves whether or not to settle a dispute and the terms of any settlement 3 . It is therefore apparent that mediation, unlike arbitration, is not an adjudicatory process. It is essentially a negotiation process where the mediator merely facilitates an amicable settlement between the parties. Historically, it has been observed that the parties tend to honor the terms of settlement reached in the process of mediation as such terms of settlement are decided by the parties themselves. It is not in the nature of adjudication by a court of law, but rather a middle path of understanding decided by the parties for their mutual benefit.

However, the issues of breach and enforceability of a mediated settlement have the potential of causing concern in a situation where the terms of a settlement have to be performed over a period of time. In such a situation, a party to the settlement agreement may end up breaching such an agreement by not performing certain obligations at a point of time. It can be reasonably assumed that most people would not want to spend their resources on arriving at an agreement which is not enforceable. As the parties to mediation are encouraged to formulate their own terms of settlement, often the mediated settlement itself addresses the options available to the parties in the event of non-compliance of the terms therein.

Although the general uninformed view on the subject seems to be against the enforceability of a mediated settlement, an analysis of the growth of mediation in India paints a relatively positive picture.

In India, mandatory mediation through courts has now received legal sanction under Section 89 of the Code of Civil Procedure, 1908. Mediation Centres have now been established at many courts and the courts have started referring cases to such Mediation Centres. This is generally referred to as ‘Court-Annexed Mediation’. The terms ‘Court-Annexed Mediation’ and ‘Court-Referred Mediation’ are often used interchangeably in common parlance. However, there is an essential distinction between the two concepts. Court-Annexed mediation entails mediation services provided by the court as a part and parcel of the same judicial system, while, Court–Referred Mediation pertains to disputes which are merely referred by courts to a mediator. The

element that these two concepts have in common is that they are both concerned with disputes in litigation. Many High Courts in India have framed their respective mediation rules , wherein it has been provided that once a settlement is reached upon during the course of mediation the same shall be reduced into writing, signed by the concerned parties and forwarded to the court in which the suit is pending. The Court then records the settlement and passes a decree in accordance with the terms of the settlement. Only on passing of a decree on the basis of the settlement agreement will it be considered final, binding and effective . However, there can be no revision or appeal against such a decree .

Private Mediation, on the other hand, mainly involves pre-litigation disputes. It differs from Court-Annexed or Court-Referred mediation insofar as the parties on their own accord approach a mediator with a view to reach an amicable settlement.

Enforceability of a Private Mediated Settlement
i) As a Contract between the parties

The Mediation Training Manual of India published by the Supreme Court of India recognizes the enforceability and binding nature of a settlement reached at a pre-litigation stage as a contract. As such, these agreements take the character of private agreement which at a point of time may be sought to be enforced by one of the parties alleging a breach. The Delhi High Court has taken the view that in such a case the remedy of execution is not available and the party alleging breach will have to initiate appropriate legal proceedings in accordance with law for seeking enforcement of the settlement in the form of a private agreement.

ii) As a Conciliator’s Award

As in the case of court-referred mediation, in private mediation too the parties can agree to treat the settlement agreement as a conciliation agreement which then will be governed by the provisions of the Arbitration and Conciliation Act, 1996 .

In such a case, the written agreement containing terms of settlement reached upon in the course of mediation is required to be signed by the parties and authenticated by the Mediator’s

signature. The agreement will then be treated as a conciliation agreement and will be governed by Section 73 and Section 74 of the Arbitration and Conciliation Act, 1996 which provides that the terms of such an agreement will then be final and binding on the parties and the status and effect of the settlement agreement will be at par with an arbitration award.

Enforceability of a mediated settlement at par with an arbitration award is also possible when such an agreement is reached in mediation which has been initiated by the arbitral tribunal during arbitral proceedings under Section 30 of the Arbitration and Conciliation Act, 1996. The arbitral tribunal may record the settlement in the form of an arbitral award on such agreed terms. However, it is only when the settlement is recorded in the form of an arbitral award that it is given the same status as an arbitral award.

iii) Filing a suit under Order 23 Rule 3 of the Code of Civil Procedure, 1908

The Code of Civil Procedure, 1908 recognizes the possibility of compromise of a suit. If during the course of a suit, the parties come to a mutual understanding to reach a settlement, the terms of such compromise is reduced into writing and signed by the parties, which is then ordered to be recorded by the court and a decree is passed in accordance with the terms of such compromise.9

The Supreme Court of India has observed that “whenever such settlements reached before non-adjudicatory ADR fora are placed before the court, the court should apply the principles of Order 23 Rule 3 of the Code and make a decree or order in terms of the settlement, in regard to the subject-matter of the suit or proceeding.”10

It is open to the parties to a mediated settlement to file a suit regarding the subject-matter of dispute and subsequently, make an application under Order 23 Rule 3 of the Code of Civil Procedure in order to have a decree passed by the court on the basis of such mediated settlement. Once such a decree is passed by the court, the mediated settlement will be final and binding on the parties therein. This is a peculiar but effective approach to ensure enforceability of a mediated settlement, wherein the parties approach the court after resolving their dispute.


On account of a legally binding contractual understanding which is further cemented by voluntary consensus, mediated settlements continue to remain effective even without specific statutory enablers.

Given that a conciliation settlement agreement is enforceable in the same manner as an arbitral award 11, the possibilities of structuring a mediated settlement as a conciliation settlement agreement strengthens its enforceability. Therefore, in order to provide the mediation enhanced effectiveness, the disputing parties may be encouraged to pass the settlement arrived during mediation as a conciliation settlement agreement. However, in adopting this practical restructuring, strictly, intended for the purpose of enhanced enforceability, the mediator has to understand that in the process of conciliation, a conciliator can play an active and an interventionist role because of the statutory power given to him to make proposals for settlement of disputes and to formulate terms of a settlement agreement. On the contrary, a mediator is only a facilitator of the process and does not play an active role in the dispute resolution process. Therefore, while drafting the mediated settlement as a conciliation settlement agreement, the mediator should be sensitive to his newly adopted role as a conciliator and draft the mediated settlement agreement accordingly. The bottom line, being that the mediator assumes the role of a conciliator, in good faith, with the consent of the disputing parties for the mediated settlement agreement to be passed as a conciliation settlement agreement.

Contemporary arbitration rules seem to be attempting to harmonize different approaches of alternate dispute resolution by trying to bring in mediation within the framework of arbitration. Med-Arb agreements are one of the preferred forms in which mediation tends to present itself. As the name suggests it is a combination of mediation and arbitration. The process of mediation takes place in the beginning and if the mechanism is not successful then the parties take up arbitration. The advantage of such an agreement is that the mediated settlements may be issued in the form of consent arbitral awards and therefore it enjoys the benefits of arbitration’s enforceability regime. If the mediation is unsuccessful, the arbitration can continue and the parties are assured of a final outcome in the form of an arbitral award.

Author Information

Name: Gerald Manoharan
Designation: Partner, J. Sagar and Associates, Bangalore,

Name: Tanvi Kishore
Designation: Associate, J. Sagar and Associates, Bangalore
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