Before the Lawsuit Begins: India’s Mediation Push and the Problem No One Talks About

Commercial disputes seldom announce themselves dramatically; they take shape through contested obligations, delayed performance, and increasingly adversarial exchanges, until litigation becomes inevitable. Indian law, however, now attempts to intervene earlier, redirecting parties toward mediation before a suit is even filed. As the Hon’ble Prime Minister of India, Shri Narendra Modi, has observed in the context of legal reform, the aim is to create systems that are “less adversarial and more facilitative” for economic activity, a shift that places mediation at the very threshold of commercial dispute resolution.

This logic appears first in the pre-institution mediation mandate under the Commercial Courts Act, 2015 and finds more comprehensive expression in the Mediation Act, 2023. It also underpins the state’s broader push to normalize mediation as a first response rather than a last resort. The ambition is not merely procedural efficiency. It is economic, faster dispute resolution signals reliability, and reliability fuels investment. In that sense, mediation begins to resemble infrastructure: invisible, but indispensable.

The judiciary has largely aligned with this direction. The Chief Justice of India, Hon’ble Mr. Justice Surya Kant, has repeatedly emphasized mediation as a necessary correction to judicial overload, framing it not as compromise but as an extension of justice itself.

But this shift did not emerge suddenly. It has been built slowly, through a series of judicial calibrations around commercial dispute resolution.

The foundation was laid in Afcons Infrastructure Ltd. v. Cherian Varkey Construction Co. (P) Ltd. 2010 (8) SCC 24, where the Supreme Court interpreted Section 89 of the Civil Procedure Code and encouraged courts to actively identify commercial disputes suitable for alternative resolution. Mediation, at that stage, was aspirational, a recommended detour, not a requirement.

That changed decisively in Patil Automation Pvt. Ltd. v. Rakheja Engineers Pvt. Ltd. (2022) 10 SCC 1. The Court held that pre-institution mediation under Section 12A is mandatory for commercial disputes, unless urgent interim relief is genuinely required. Without compliance, a commercial suit could be rejected outright. Mediation, in effect, became the gateway to litigation.

Yet systems adapt. Litigants soon began invoking “urgent interim relief” as a standard pleading strategy to bypass mediation altogether. What was meant to be an exception started functioning as an exit route.

The Court responded in Yamini Manohar v. T.K.D. Keerthi (2024) 5 SCC 815, clarifying that urgency cannot be assumed from pleadings alone. Commercial courts must examine whether urgency is genuine or merely a device to circumvent statutory mediation. The Court explicitly cautioned against procedural camouflage.

That approach was further refined in Dhanbad Fuels Pvt. Ltd. v. Union of India (2025 INSC 696), where the Court addressed the treatment of pre-institution non-compliance by holding that such suits need not be dismissed mechanically. Instead, it permitted pre-mandate suits to be paused and referred to time-bound mediation, preserving procedural fairness while ensuring compliance with Section 12A. The idea was not punishment, but structured transition.

Then came doctrinal sharpening in Novenco Building and Industry A/S v. Xero Energy Engineering Solutions Pvt. Ltd. (2025 INSC 1256), where the Court held that in continuing commercial harm, especially intellectual property disputes — urgency persists as long as the violation continues. “Urgency lies not in the age of the cause, but in the persistence of the peril.” At the same time, it warned against routine invocation of urgency to escape mediation.

Parallel to this judicial tightening, the legislature has attempted to close remaining gaps. The proposed amendment under the Commercial Courts (Amendment) Bill, 2024 strengthens Section 12A by allowing courts to send parties back to mediation even after interim relief applications are decided. In effect, mediation becomes unavoidable, only deferred.

On paper, this is a system steadily closing escape routes. In practice, however, outcomes tell a different story.

Data placed before the Rajya Sabha through a Ministry of Law and Justice response shows that mandatory pre-institution commercial mediation under Section 12A has a success rate of less than 2% as of 2026, despite more than 5.6 lakh applications filed since 2018 under the PIMS framework.

This gap is not marginal. It is structural.

At the pre-institution stage, commercial parties arrive with positions fully hardened. There is no sunk cost pressure, no litigation fatigue, no accumulated uncertainty. Mediation is frequently treated as a procedural checkpoint before the “real” contest begins, and many matters never progress beyond formal compliance into meaningful dialogue.

Court-annexed mediation, however, operates in a completely different psychological environment. By the time a commercial dispute reaches a judge-led referral under Section 89 of the Civil Procedure Code of India, costs have mounted, delays have accumulated, and uncertainty has set in. Settlement becomes rational rather than optional.

Authority also matters. A judicial referral carries institutional weight; pre-institution mediation, often administered through Legal Services Authorities or mediation service providers, does not always generate the same behavioural compliance. The result is predictable: attendance without engagement, participation without intent.

This exposes a deeper design tension. Commercial mediation depends on voluntary seriousness. Mandatory pre-institution mediation guarantees presence, but not purpose. Even the scale of filings under the PIMS framework reinforces this paradox, procedural compliance at volume, but limited conversion into durable settlement outcomes.

For businesses, this opens strategic space. Mediation becomes a compliance step, used to test positions, delay escalation, or simply clear procedural requirements before litigation begins. The form is preserved, but its function shifts from resolution mechanism to procedural gateway.

Looking outward sharpens the contrast.

In Norway, mediation is structurally embedded through the konfliktråd (conflict council) system under the Norwegian Mediation and Conciliation Act. Civil disputes and in limited cases minor criminal matters are first routed to local conciliation boards where trained lay mediators facilitate resolution through structured dialogue. Mediation here functions as the system’s default entry point into dispute resolution, not an optional alternative to adjudication.

Sweden follows a more court-integrated but equally structured model through court-annexed conciliation (domstol förlikning) under the Swedish Mediation Act. Mediation is embedded within judicial case management itself, with courts actively steering parties toward settlement in family, labour, and restorative disputes. The emphasis is not diversion from adjudication, but settlement as an intrinsic stage within it.

Read together, the Nordic design collapses the hierarchy between adjudication and settlement. Whether through Norway’s konfliktråd system or Sweden’s domstolsförlikning framework, mediation is structurally positioned as the first institutional response to conflict — either before or within the judicial process. The distinction between litigation and settlement is procedural, not foundational.

This is the core asymmetry. In the Nordic system, mediation is structurally embedded as the first point of engagement. In India, whether in family, civil, or commercial disputes, it functions primarily as a statutory precondition to access adjudication, rather than an internalised first response.

India has built strong statutory scaffolding for mediation in commercial disputes but has not yet achieved comparable behavioural internalisation. The architecture exists, but the instinct has not fully shifted. Mediation is complied with, not culturally absorbed as the default mode of early dispute resolution.

This tension defines the present moment. Alternative dispute resolution carries deep civilisational roots in India, yet its modern commercial expression remains uneven, formally advanced, but inconsistently internalised.

The system, therefore, moves forward but rarely in a straight line. Even as legislative design tightens and judicial doctrine sharpens, commercial mediation continues to oscillate between obligation and opportunity, form and function.

In that sense, mediation resembles infrastructure: invisible, but indispensable to the system’s movement.

India’s mediation journey is neither failure nor arrival. It is something more ambiguous: a system still negotiating its own logic — like a knight on a chessboard, moving two steps forward, one sideways, always advancing, but never in a straight path.