May 30,2020 | 4 min read

Pre-Institution Mediation, A Panacea For COVID-19, Uncertainty By N Prashanth Chandra

Author - S N Prashanth Chandra

Understanding with an illustration

T is the tenant by virtue of a tenured lease for 25 years running a paying guest hostel for students and working professionals. The terms of the lease stipulate a monthly rent of Rs 40,000.00 with a refundable deposit of Rs 4,00,000.00. T has spent several lakhs on the premises to suit the business, besides engaging several staff members to run the business. The students of educational institute situated close to the premises are his main customers while the remaining are occupied by working professionals.

The Covid-19 pandemic & due to consequent lockdown, students of educational institutions, and the business, the occupants have vacated the premises. T is not sure of the students returning to the premises in the near future and the situation is gloomy due to the continuing uncertainty.

Strapped of a regular income from the business, T defaults in the payment of rent, besides the salary of staff members. The landlord O, puts T on notice, the consequence of default in payment of the rent.

O has his difficulties of repayment of bank loan taken during construction, and uncertainty of securing a new tenant like T, who otherwise had been very prompt.

Does law afford them a platform to resolve their conflict or approaching the Court of law is their sole option?

The Commercial Courts Act,2015, affords a platform for disputants in a commercial relationship to resolve the dispute with the assistance of a neutral third party (mediator) for assisted negotiation, for a win-win situation, rather than a win lose situation in a Court of law.

Unlike in an adjudicatory process like the Courts or arbitration, mediation process focuses on identifying the mutual problems, their underlying interests and provides a platform for T & O to move from blame to understanding & un certainty to certainty; mediation is a non-judgmental process and both have flexibility to agree to agree on a mutually workable solution, which would be recognised and enforceable in law, thereby saving time, cost and relationship.

Disputants usually knock at the doors of Courts when adjudication to their dispute is inevitable and sans a mutually acceptable resolution. It would well be within the rights of the parties to resolve the dispute by accepting reduced rent for a stipulated period with liberty to fix enhanced rent, later with variety of options including to renew or terminate the tenure of the lease or permit T to change nature of business and forego the rent during such period of transition.

Pre- Institution Mediation is ideally suited to the occasion as it attempts to effectively address their real apprehensions & facilitates a workable new contract which shall be binding, enforceable and everlasting.

To conclude, the concept of Pre-Institution mediation under The Commercial Courts Act, 2015 is a game changer and a panacea for ease of doing business during the troubled economic situation.

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