Mediation is a process in which parties attempt to reach an amicable settlement of their dispute with the assistance of a neutral mediator who has no authority to impose a decision. The Mediation Act, 2023 provides for pre-litigation mediation (voluntary, except where another law such as Section 12A of the Commercial Courts Act makes it mandatory), a time limit of 120 days extendable by 60, and makes a signed mediated settlement agreement final, binding and enforceable in the same manner as a court judgment or decree.
How mediation works in India
A party applies to a mediation service provider, court-annexed centre or Legal Services Authority, or the parties jointly appoint a mediator. The mediator holds joint and private sessions, helps each side understand the other's constraints and tests settlement options. If agreement is reached, the terms are recorded in a mediated settlement agreement signed by the parties and authenticated by the mediator. Under the 2023 Act that agreement is enforced like a decree, and can be challenged only on narrow grounds within 90 days. If no agreement is reached, the mediator issues a non-settlement report and the parties are free to litigate or arbitrate.
Why it matters for getting paid
For a supplier, mediation is a structured way to convert a stalled receivable into a signed, enforceable payment schedule within weeks. It preserves the trading relationship, and for commercial suits of ₹3 lakh or more it is compulsory anyway under Section 12A. Buyers who will not reply to notices often engage once a neutral is involved. Compare conciliation under the MSMED Act, which serves the same purpose for MSME claims.
How FundRaksha uses it
FundRaksha's advocates propose mediation where the buyer is solvent and the relationship matters, and always carry a complete statement of account and a draft settlement to the first session. A settlement with post-dated cheques or an e-mandate is signed on the spot wherever possible. This contributes to the 60% of FundRaksha cases resolved before court; the fee is 30% of recovery.
Worked example (hypothetical)
A Noida event-management agency is owed ₹11,00,000 by a corporate client who disputes ₹2,00,000 of it as "unapproved extras". A mediation session is held at a court-annexed centre. The mediator helps the parties separate the undisputed ₹9,00,000 from the disputed ₹2,00,000. The client agrees to pay ₹9,00,000 within 30 days and ₹1,00,000 towards the extras within 60 days; the agency waives the remaining ₹1,00,000 and interest. The mediated settlement agreement is signed and is enforceable as a decree. The agency receives ₹10,00,000 within two months instead of litigating for ₹11,00,000 for years.
Last reviewed: 2026-10-08. Information for Indian businesses; not legal advice.