Third Schedule of Mediation Act 2023
The Third Schedule, read with Section 58 of the Mediation Act, 2023, amends Section 28 of the Indian Contract Act, 1872 by substituting Exception 1 and Exception 2 so that agreements referring disputes to mediation are expressly recognised alongside agreements referring disputes to arbitration.
Section 28 of the Indian Contract Act 1872
Section 28 deals with agreements in restraint of legal proceedings. Broadly, it renders void agreements that absolutely restrict a party from enforcing contractual rights through usual legal proceedings, or that improperly limit the time within which contractual rights may be enforced, subject to the statutory exceptions and other terms of the section.
The Third Schedule specifically substitutes the first two exceptions to Section 28. The amendment expressly includes mediation as a recognised method to which parties may agree to refer disputes.
Exception 1 - Future disputes referred to arbitration or mediation
This exception preserves a contract under which two or more persons agree that a dispute which may arise between them concerning a subject or class of subjects will be referred for resolution through arbitration or mediation.
The effect is that an agreement to use arbitration or mediation for a future dispute is not rendered illegal merely because Section 28 restricts contractual restraints on legal proceedings.
Exception 2 - Existing questions referred to arbitration or mediation
This exception preserves a written contract under which two or more persons agree to refer an already existing question between them to arbitration or mediation. It also preserves the operation of any law in force concerning references to arbitration or mediation.
Why mediation was added to Section 28
The amendment aligns the Indian Contract Act with the statutory mediation framework established by the Mediation Act, 2023. It places mediation alongside arbitration in the two Section 28 exceptions dealing with agreements to refer future disputes and existing disputes for consensual dispute resolution.
Meaning of mediation under the Mediation Act
Section 3(h) of the Mediation Act uses a broad definition of mediation. It covers processes described as mediation, pre-litigation mediation, online mediation, community mediation, conciliation or an expression of similar import, in which parties attempt to reach an amicable settlement with the assistance of a third person who has no authority to impose a settlement.
Practical legal effect
The Third Schedule makes clear that contractual arrangements to refer disputes to mediation are not invalid merely by reason of Section 28 of the Contract Act. The first exception addresses disputes that may arise in the future, while the second addresses questions that have already arisen and requires the referral contract to be in writing.
The validity and enforceability of any particular dispute-resolution clause will still depend on its terms and the other applicable provisions of contract and mediation law.
Statutory text covered by the Third Schedule
The Schedule applies to Section 28 of the Indian Contract Act, 1872 (9 of 1872) and substitutes Exception 1 and Exception 2 with provisions expressly referring to both arbitration and mediation.
For a live matter, consult the current consolidated statutory text and applicable commencement notifications before relying on a provision.