Lakhs of commercial cases enter mandatory mediation, barely 2% settle

Nearly seven years after India made pre-trial mediation mandatory in commercial disputes, figures suggest mediation is barely taking place. Government data shows only 1.75% of more than 270,000 applications referred through the process have been finalized since 2018.

Lawyers say the process has been treated as a procedural hurdle rather than a serious resolution effort, with parties reluctant to take early action and little certainty about implementation.

“In most commercial cases, mediation fails before it even begins,” said Gauhar Mirza, partner at Saraf and Partners. “Often the other side does not show up. Even if they do, they do not have the authority or preparation. When true mediation occurs, agreements also occur, but very few cases reach this stage.”

Data submitted to the Rajya Sabha by the Ministry of Law and Justice shows that although thousands of commercial disputes are referred to mandatory pre-institution mediation under the Commercial Courts Act, 2015, only a small number are actually resolved. The statement came in a written response on January 29 to a question asked by Trinamool Congress MP Sagarika Ghose.

According to the data, more than 270 thousand applications have been made to pre-institutional mediation since 2018, when Article 12A of the Commercial Courts Law came into force in order to resolve commercial disputes faster. Most disputes never progressed to actual mediation or ended without any resolution.

Advocates say the mandatory nature of pre-trial mediation runs counter to the core idea of ​​mediation and undermines business confidence in the process.

“The numbers tell a very clear story,” said Shaneen Parikh, partner and head of international arbitration at Cyril Amarchand Mangaldas. “Out of nearly 60,000 mediation applications in 2024-25, fewer than 900 agreements emerged. Parties clearly do not see value in the process and prefer to litigate or compromise informally.”

Just adding load?

Rather than reducing court congestion, mandatory mediation has added an extra layer of procedures that businesses must deal with before proceeding with their cases, Parikh said.

While mediation filings increased from 3,680 in FY 2019 to nearly 60,000 in FY 25, settlement rates remain negligible.

Mediation is part of alternative dispute resolution (ADR), which also includes arbitration, conciliation and negotiation. While mediation is based on voluntary agreement with the assistance of a neutral mediator, arbitration results in a binding decision by the arbitrator.

Pre-institutional mediation was introduced in 2018 within the scope of the Commercial Courts Law in order to encourage early resolution of commercial disputes and reduce pressure on the courts.

Parties involved in the above commercial disputes pursuant to Section 12A ₹3 lakh should attempt mediation before filing a lawsuit unless an urgent interim solution is required.

Government figures released on a year-by-year basis underline how limited the results are. Between July 2018 and March 2019, only 25 out of 3,680 applications were finalized. Although more than 18,000 applications were submitted each year, the number of placements in FY 2020 and FY 21 were 167 and 186, respectively. While applications rose to 32,335 in FY22 and 46,412 in FY23, disbursements remained low at 368 and 1,449.

This trend has worsened in recent years, with only 1,139 placements in FY24 and 877 in FY25 out of nearly 60,000 applications.

Kochhar & Co. “There is a risk that repeated failures of pre-institution mediation will reduce business confidence in ADR, especially when such low settlement rates are seen as evidence that the process does not work,” said partner Shiv Sapra.

Why doesn’t mediation start?

Mediation often fails, lawyers say, because parties view it as a procedural formality rather than a genuine effort to resolve disputes. In high-value commercial cases, companies are reluctant to settle at an early stage and worry that mediation could weaken their negotiating positions. The process also collapses early in many cases due to parties delaying or refusing to participate, leading to some issues being treated as non-starters.

“In most commercial cases, mediation fails before it even begins,” said Gauhar Mirza, partner at Saraf and Partners. “Often the other side does not show up. Even if they do, they do not have the authority or preparation. When true mediation occurs, agreements also occur, but very few cases reach this stage.”

The way forward

Dispute resolution experts say reforms are needed to make the framework effective. These include penalties for refusing to participate in mediation, denying parties the power to make decisions, and closer oversight of the courts.

From an investor perspective, Parikh said faster implementation of mediation agreements and India’s ratification of the Singapore Mediation Convention could help restore trust by allowing cross-border enforcement of settlement agreements.

India signed the Singapore Mediation Convention on 7 August 2019 but has not yet ratified it.

The Singapore Mediation Convention is a UN treaty that allows international commercial mediation agreements to be enforced directly across borders. This is very important for investors because agreements reached through mediation can be enforced without initiating new lawsuits or arbitration.

An analysis in IndiaCorpLaw notes that under Indian law, mediation agreements are often treated as private contracts, making enforcement slow and uncertain. Ratification of the Singapore convention will close this gap, make mediation in cross-border affairs more reliable, reduce legal costs and increase investor confidence in India’s dispute resolution system.

Does mediation work globally?

In mature jurisdictions such as the United Kingdom, mediation falls within the scope of civil procedure and is not subject to separate legislation. Courts actively encourage mediation through cost sanctions in the event of unreasonable refusal, creating strong judicial pressure while keeping the process voluntary.

Mediation in the United States is governed by a mix of federal rules, state laws, and court-specific procedures rather than a single law. Many federal courts encourage or require mediation under district court rules; States regulate mediation through their own civil procedure laws.

How does politics react to this?

Concerns about compulsory mediation have also been flagged at the policy level. In 2023, a document prepared by the Prime Minister’s Economic Advisory Council (EAC-PM) argued that pre-litigation mediation should be made optional under the Commercial Courts Act, noting that mandatory mediation could add another three to five months due to disputes over timelines and increase legal costs for businesses.

In September 2023, Parliament passed the Mediation Act, 2023, which sets out a broader framework for the functioning of mediation in India. However, this has not changed the requirement for pre-trial mediation, which is mandatory under the Commercial Courts Law. Mandatory mediation in commercial disputes continues as before; The new law only regulates the mediation process and the enforcement of settlements.