MSME Mediation Lawyer

Looking for help with mediation, conciliation and lok adalat across India? This page explains how such matters work, which court or authority decides them, the documents to keep ready and what to do first. Advocate B.K. Singh and the Legals365 team work from Delhi NCR and handle matters in other cities through associate counsel and video hearings.

In short. Mediation and conciliation are processes where a neutral person helps the parties reach their own settlement; nothing is imposed. A Lok Adalat settles pending or pre-litigation cases by agreement, and its award is final with no appeal. Commercial disputes of 3 lakh rupees and above need pre-institution mediation under section 12A of the Commercial Courts Act unless urgent interim relief is sought.

Most disputes that reach a lawyer's office end in a settlement sooner or later. The question is whether that happens after six months or after six years, and whether the settlement is written so that it actually works. Mediation, conciliation and Lok Adalats are the formal routes to that settlement. Used well, they save money and relationships. Used carelessly, they produce a vague compromise that nobody follows and a second round of litigation.

This page explains the main settlement processes available in Delhi, Uttar Pradesh and Haryana: court-referred mediation, pre-institution mediation in commercial cases, conciliation under the Arbitration and Conciliation Act and before MSME Facilitation Councils, National and Permanent Lok Adalats, and mediation in family and cheque bounce cases. It covers when each one fits, how to prepare, how the settlement is drafted and enforced, and when settlement is the wrong choice.

Law

CPC s.89 and Order 10 rules 1A to 1C, Commercial Courts Act 2015 s.12A, Arbitration and Conciliation Act 1996 Part III (ss.61 to 81), Legal Services Authorities Act 1987 (ss.19 to 22E), MSMED Act 2006 (ss.15 to 19), Mediation Act 2023 (provisions in force as notified), Family Courts Act 1984 s.9

Forum

Court-annexed mediation centres, the Delhi High Court Mediation and Conciliation Centre, District Legal Services Authorities, National and Permanent Lok Adalats, MSME Facilitation Councils, private and institutional mediators

Time limit

Pre-institution mediation under s.12A: 3 months, extendable by 2 months, with that period excluded from limitation; MSME Facilitation Council: reference to be decided within 90 days; court-referred mediation: as fixed by the court

Documents

Pleadings or notice, the contract, invoices and ledger, correspondence, a clear statement of what you want and what you can accept, and written authority to settle if you represent a company

Mediation, conciliation and Lok Adalat: what each one is

Mediation is a structured negotiation with a neutral mediator who helps the parties understand each other's position and find terms both can accept. The mediator does not decide anything and does not give a binding view on who is right. If the parties agree, they sign a settlement; if not, they go back to court or arbitration with nothing lost except time.

Conciliation is close to mediation, but the conciliator may be more active and can propose terms of settlement. Under Part III of the Arbitration and Conciliation Act 1996, a settlement agreement signed in conciliation has the same status and effect as an arbitral award on agreed terms (sections 73 and 74), which makes it directly enforceable. Conciliation is also the first stage before an MSME Facilitation Council.

A Lok Adalat is a forum organised by the legal services authorities under the Legal Services Authorities Act 1987. It takes up pending cases and pre-litigation disputes, and where the parties agree, it passes an award that is deemed a decree of a civil court, final and binding, with no appeal (section 21). A Permanent Lok Adalat for public utility services goes further and can decide a dispute on merits if conciliation fails. Arbitration, by contrast, is a private trial with a binding decision and is covered on our page on arbitration.

Comparing the settlement routes

The law behind mediation and settlement

Court-referred mediation in Delhi and NCR courts

Court-referred mediation is the most common form. When a civil suit, commercial case, matrimonial petition, maintenance case or cheque bounce complaint is listed, the judge often asks whether the parties want to try mediation, and if both agree, refers them to the court's mediation centre with a date to report back. In Delhi, the Delhi High Court Mediation and Conciliation Centre (Samadhan) handles High Court references, and each district court complex, including Tis Hazari, Saket, Patiala House, Karkardooma, Rohini, Dwarka and Rouse Avenue, has a mediation centre. The Gautam Buddh Nagar court at Surajpur and the Ghaziabad district court have their own centres.

Sessions are private and confidential. What is said in mediation cannot be used as evidence later, and the mediator's report to the court says only whether the matter settled, not who was unreasonable. Parties usually attend in person with their advocates; companies send an officer with authority to settle. Several sessions over a few weeks are normal.

If the parties settle, the settlement is reduced to writing, signed and sent back to the referring court, which records it and passes a decree or order in terms of it. For a district court case in Delhi NCR, our page on district court cases explains how matters move through the system. If the effort fails, the case resumes where it left off.

Pre-institution mediation in commercial disputes

Before filing a commercial suit of 3 lakh rupees or more without an urgent interim relief application, the plaintiff must apply for pre-institution mediation to the District Legal Services Authority or the designated authority. The authority issues notice to the other side. If the other side does not appear, a non-starter report is issued and the plaintiff can file the suit. If it appears, mediation runs for up to three months, extendable by two.

The claimant should treat the application seriously, not as a formality. It should set out the claim and documents clearly, because a well-documented claim often produces a payment offer at this stage. The respondent should attend with a real proposal or at least a clear reason for disputing the claim; a buyer who ignores the process may find the suit filed quickly with a strong record behind it.

Courts have been firm that the urgent relief exception is not a device to skip mediation. A plaint that asks for interim relief only to avoid section 12A, with no real urgency, can be rejected. For the wider commercial court process that follows a failed mediation, see our page on commercial litigation.

MSME conciliation before the Facilitation Council

A micro or small enterprise registered under the MSMED framework (Udyam registration) that is owed money for goods supplied or services rendered can file a reference before the Micro and Small Enterprises Facilitation Council of the state where it is located, usually online through the MSME Samadhaan portal. The Council first conducts conciliation, either itself or through an institution. Many claims settle at this stage because the buyer faces compound interest at three times the bank rate and a 75% deposit if it later challenges an award.

If conciliation fails, the Council takes up arbitration itself or refers it to an institution. The Supreme Court has held that section 18 of the MSMED Act overrides a private arbitration clause in the contract, so the supplier can use the Council even where the agreement names another arbitrator. Whether the supplier was registered on the date of the contract can matter, so check the registration dates before filing.

For buyers, the practical advice is to respond to the notice with documents showing quality complaints, short supply, set-offs or that the supplier is not a micro or small enterprise. Our page on MSME disputes and Facilitation Council claims covers the claim in more detail.

Lok Adalats and Permanent Lok Adalats

National Lok Adalats are held on fixed dates across the country by NALSA through the state and district legal services authorities, and courts also hold Lok Adalats more often. Banks, NBFCs, insurers, telecom and electricity companies send large numbers of pre-litigation cases, so a borrower may receive a Lok Adalat notice for a loan default or credit card dues. Cheque bounce, motor accident claims, matrimonial disputes other than divorce, and revenue cases are also common.

A Lok Adalat can only record a settlement; it cannot decide a disputed case. If the parties agree, the award is final and executable as a decree, the court fee paid is refunded, and there is no appeal. If they do not agree, a pending case goes back to the court and a pre-litigation matter stays where it was. An award can be challenged only by a writ petition on narrow grounds such as fraud or lack of real consent, which is why the terms must be read carefully before signing.

Permanent Lok Adalats for public utility services, such as transport, postal and telephone services, power and water supply, hospitals, insurance and banking, work differently. A party can apply before any court case is filed. The Permanent Lok Adalat tries conciliation first and, if that fails, decides on merits within its pecuniary limit, and its award is final. For bank dues, a Lok Adalat settlement can sit alongside a broader one-time settlement with the bank, but the terms must match.

Mediation in family court cases

Family courts are required to attempt settlement. Section 9 of the Family Courts Act 1984 and section 23(2) of the Hindu Marriage Act 1955 place a duty on the court to try reconciliation where possible, and most matrimonial cases in Delhi NCR are referred to the mediation centre early. Mediation does not always mean reconciliation; often it means agreeing the terms on which the parties separate.

A good family mediation produces a single settlement covering divorce by mutual consent under section 13B, permanent alimony, return of streedhan and gifts, custody and visitation of children, and withdrawal of all pending cases, including maintenance, domestic violence and criminal complaints. The settlement should fix the instalments and link them to each stage of the divorce petition, so that neither side is left exposed if the other backs out. Our page on mutual consent divorce explains the court stages.

Mediation is not suitable where there is ongoing violence, threats or a serious imbalance of power, and a party should never be pressured into a settlement out of fear. Custody terms should put the child's welfare first, and the court retains the power to vary them later.

Mediation in cheque bounce and criminal cases

Cheque bounce cases under section 138 of the Negotiable Instruments Act 1881 are compoundable under section 147, so they are regularly sent to mediation or Lok Adalat. A settlement usually provides for payment in instalments, with the complaint kept pending until the last payment and then compounded. The complainant should insist on a default clause that revives the case, and the accused should make sure the settlement records full and final discharge. For the complaint itself, see our page on cheque bounce complaints.

Other compoundable offences under the Bharatiya Nagarik Suraksha Sanhita 2023 can also be settled and compounded with the court's permission where required. Non-compoundable offences cannot be compounded by agreement, but where the dispute is essentially private, such as a matrimonial or commercial dispute that has been settled, the High Court can quash the case under section 528 of the BNSS. Serious offences against society are not settled this way.

How a mediation runs

Whatever the forum, most mediations follow a similar pattern.

1. Reference or application

   The court refers the case, or a party applies to the DLSA, Facilitation Council, Lok Adalat or a private mediator. Notice goes to the other side with a date for the first session.

2. Opening joint session

   The mediator explains the process, confidentiality and ground rules. Each side, usually through its advocate, gives a short account of the dispute and what it wants.

3. Private sessions

   The mediator meets each side separately to understand interests, weaknesses and room to move. What is said privately stays private unless the party allows it to be shared.

4. Offers and counter-offers

   Proposals pass back and forth, often over several sessions. Good mediators test each offer against what a court is likely to do and how long it will take.

5. Drafting the settlement

   Once terms are agreed, the advocates and mediator write them down precisely: amounts, dates, mode of payment, default consequences and withdrawal of cases. Both sides sign.

6. Recording and enforcement

   The settlement goes to the referring court, which passes a decree or order, or takes effect as an award or decree under the relevant law. If terms are breached, it is enforced through execution.

Preparing for mediation

Preparation decides most mediations. Before the first session, know your own case honestly: the documents that help, the ones that hurt, the likely time and cost of fighting to the end, and what the other side can actually pay or do. Work out your best realistic outcome and the point below which you would rather go to court. Without that, people either refuse a good offer or accept a poor one under pressure.

Bring the documents: the contract, invoices and ledger, correspondence, pleadings, bank statements, and for family matters, income and asset details. A company should send someone with written authority to settle up to a stated limit; a settlement that has to go back to a board for approval loses momentum. Advocates should prepare a short note of figures, including interest calculations, so that numbers can be discussed on the spot.

In mediations that Advocate B.K. Singh's office handles, the session that settles is usually the one where both sides finally talk about payment schedules rather than about who was right. Getting to that point quickly, with numbers ready, is often the most useful thing a lawyer can do in the room.

Checklist before you attend mediation

• Copy of the plaint, written statement, complaint or notice
• The contract, work orders, invoices and account statement
• Correspondence and messages showing admissions or disputes
• A calculation of the amount claimed, with interest worked out
• Your minimum acceptable terms, decided in advance
• Written authority to settle, if you represent a company or firm
• Details of all related cases that should be withdrawn in a settlement
• Bank details and a realistic payment schedule, if you are paying
• For family matters, income, assets and children's school and expense details
• A list of non-money terms you need, such as an apology, return of goods or a no-dues letter

Drafting a settlement that works

A settlement is only as good as its wording. It should name the parties correctly, recite the cases being settled with their numbers and courts, and set out each obligation with an amount, a date and a mode of payment. Where payment is in instalments, it should say what happens on default: whether the whole balance becomes due, whether the original claim revives, and whether interest runs.

It should list every pending case to be withdrawn, compounded or quashed, and say who files what and when. In property matters it should state who gets possession, when keys are handed over and who pays outstanding dues. In commercial matters it should deal with return of goods, credit notes, GST adjustments and a no-dues confirmation. In family matters it should be consistent with the divorce petition and fix alimony and custody terms clearly.

Vague clauses such as the parties will cooperate or will resolve the remaining issues amicably are where settlements fail. If something cannot be agreed, leave it out expressly rather than papering over it. A mediated settlement recorded by the court, a section 12A settlement, a conciliation settlement and a Lok Adalat award are all enforceable through execution, so precise drafting saves a later execution fight.

When mediation is the wrong choice

Mediation is not always right. It is a poor fit where you need an urgent court order, such as an injunction to stop a sale, demolition or invocation of a bank guarantee; where the other side is using mediation only to delay; where there is fraud and you need a judgment on record; or where the dispute raises a question of law that will affect many similar cases. It is also unsuitable where one party is under threat or cannot negotiate freely.

Some disputes cannot be settled by private agreement at all, such as serious criminal offences, tax liability fixed by statute, and matters affecting third-party rights in rem. Even then, related civil or commercial issues can often be settled alongside. A good lawyer will tell you when to settle, when to wait and when to fight, and will not push a weak settlement just to close the file.

Tax demands, reconciliation and disputes with government

Tax demands are not mediated in the ordinary sense, because the tax authority cannot agree to give up tax the law imposes. What often looks like a dispute, especially in GST, is a reconciliation problem: input tax credit claimed that does not match the supplier's returns, a demand raised on mismatched figures, or payments not credited. These are usually resolved by a detailed reply with reconciliation statements, rectification of returns where the law allows, and an appeal if needed. See our page on GST notices and disputes.

From time to time the government offers dispute settlement or amnesty schemes for direct and indirect tax, which work like a statutory settlement on fixed terms. Check whether a scheme is open and whether your case qualifies. For disputes with government departments and public sector undertakings over contracts, some departments have internal dispute resolution or conciliation clauses, and MSME suppliers can use the Facilitation Council against government buyers too.

Cost, time and what to do this week

Court-annexed mediation and Lok Adalats are free or nearly free apart from lawyers' fees, and pre-institution mediation through the DLSA carries only a nominal fee. Private and institutional mediation involves mediator fees and venue costs, usually shared. Most mediations finish within weeks to a few months, against years for a contested trial, and a settlement in a referred case can bring a court fee refund.

This week, collect the contract, invoices, correspondence and any pending case papers, and work out what you would accept. If you have received a notice from a DLSA, Facilitation Council or Lok Adalat, note the date and attend; ignoring it rarely helps. If you are about to file a commercial suit, check whether section 12A applies before drafting the plaint.

If you want the papers checked before you act, the team of Advocate B.K. Singh at Legals365 can review them and tell you the next step through our talk to a lawyer page.

Frequently asked questions

Is mediation compulsory before filing a commercial suit?

Yes, for commercial disputes of 3 lakh rupees and above where no urgent interim relief is sought. Section 12A of the Commercial Courts Act requires pre-institution mediation first, and the Supreme Court has held this mandatory. If the other side does not appear, a non-starter report lets you file.

Is a mediation settlement legally binding?

Yes, once signed and recorded. A settlement in court-referred mediation becomes a decree or order of the court, a section 12A or conciliation settlement has the status of an arbitral award, and a Lok Adalat award is a decree. Each can be enforced through execution.

Can a Lok Adalat award be appealed?

No. Section 21 of the Legal Services Authorities Act makes a Lok Adalat award final with no appeal. It can be challenged only through a writ petition in the High Court on narrow grounds such as fraud or absence of genuine consent.

What is the difference between mediation and conciliation?

Both use a neutral person to help the parties settle. A mediator mainly facilitates, while a conciliator can also propose terms. Under the Arbitration and Conciliation Act, a conciliation settlement has the effect of an arbitral award.

Can an MSME go to the Facilitation Council if the contract has an arbitration clause?

Yes. The Supreme Court has held that section 18 of the MSMED Act overrides a private arbitration clause, so a micro or small supplier can refer the dispute to the Facilitation Council. Registration status at the time of the contract can affect eligibility.

How long does mediation take?

Pre-institution mediation must finish within three months, extendable by two. Court-referred mediation usually takes a few sessions over several weeks. MSME Facilitation Council references are meant to be decided within 90 days, though in practice they can take longer.

Is what I say in mediation confidential?

Yes. Statements, offers and admissions made in mediation cannot be used as evidence in court, and the mediator reports only whether the case settled. This lets parties discuss settlement freely without weakening their case.

Do I need a lawyer for mediation?

It is not mandatory, but a lawyer helps assess the likely court outcome, prepares figures and, most of all, drafts a settlement that is enforceable. Badly drafted settlements are a common cause of fresh litigation.

Can a divorce case be settled through mediation?

Yes. Family courts routinely refer matrimonial cases to mediation, and many end in divorce by mutual consent under section 13B with agreed alimony, custody and withdrawal of other cases. The settlement must be followed by the court process for the divorce itself.

What happens if the other party breaks the settlement?

You enforce it. A court decree, Lok Adalat award or settlement with arbitral award status can be executed like a decree. In cheque bounce and some other settlements, the agreement may also let the original case revive on default.

Can cheque bounce cases be settled in Lok Adalat?

Yes. Cheque bounce offences are compoundable under section 147 of the NI Act, so they are regularly settled in mediation or Lok Adalat. Insist on a clear payment schedule and a clause on what happens if an instalment is missed.

Is the Mediation Act 2023 in force?

Parts of it have been notified and the rest is being brought into force in stages. It provides a general framework for mediation and enforcement of settlements. Check which provisions are in force at the time of your dispute.