The Mediation Act, 2023 gives mediated settlements the force of a court decree and formalises mediation as a first resort rather than a last one. Read alongside the mandatory pre-institution mediation already built into the Commercial Courts Act, it changes how commercial disputes should be sequenced, and how dispute-resolution clauses should be drafted.
For years, mediation in India was something parties tried when litigation had exhausted them, not something the system asked of them at the outset. The Mediation Act, 2023, which received assent in September 2023, reframes that sequence. It establishes a structured framework for mediation, gives a mediated settlement agreement the status of a judgment or decree of a court enforceable under the Code of Civil Procedure, and in doing so turns mediation from an informal courtesy into a route with real finality.
The Act's own pre-litigation mediation is voluntary: parties may, by mutual consent, attempt to resolve a civil or commercial dispute through mediation before approaching a court. But voluntariness here sits alongside an existing compulsion. Section 12A of the Commercial Courts Act, 2015 already requires a party to exhaust pre-institution mediation before filing a commercial suit of a specified value, unless urgent interim relief is sought, and the Supreme Court has held that requirement to be mandatory. The Mediation Act does not dilute that obligation; it coexists with it.
That coexistence is the point most commercial parties miss. A business that drafts a dispute-resolution clause as though mediation were purely optional can find its suit stalled at the threshold because the mandatory pre-institution step under the Commercial Courts Act was skipped. The carve-out for urgent interim relief is real but narrow, and treating every filing as urgent to avoid mediation is a strategy that courts have become adept at seeing through. Sequencing the dispute correctly is now part of getting to court at all.
The enforceability architecture is what gives mediation its new weight. A mediated settlement agreement is binding and enforceable in the same manner as a court decree, and it can be challenged only on narrow grounds such as fraud, corruption, impersonation or a dispute not fit for mediation, within a limited window of ninety days extendable by a further ninety. Compared with the long tail of challenge and appeal that can follow litigation, and even some arbitration, a mediated settlement offers a quieter and more durable close.
The grey area lies in design and in scope. Certain disputes are simply not mediable, including matters touching competition, telecom, electricity and taxation, and a clause that routes such a dispute to mediation builds in delay without a destination. Multi-tier clauses that chain negotiation, mediation and then arbitration must be drafted so that each tier has a clear trigger, a clear time limit and a clear exit, or the staged process becomes a tactical device for one side to defer the reckoning the other is seeking.
The disciplined response is to treat dispute resolution as something designed at the contracting stage, not improvised at the quarrel: identify whether the contract will attract the mandatory pre-institution route, build a mediation tier that is genuine and time-bound, preserve access to urgent interim relief, and ensure any settlement is recorded so that it carries the decree-like enforceability the Act now confers.
