In recent years, Micro Small Medium Enterprises (MSMEs) have played a significant role in the growth of the Indian economy. According to a report by the Ministry of MSMEs, the sector contributes about 30% to India’s GDP and employs around 110 million people. However, MSMEs often face various disputes related to payment, contracts, and other issues. These disputes can lead to long legal battles, resulting in time and cost overruns. Mediation is one such effective dispute resolution mechanism that can help MSMEs resolve disputes in a quick and cost-effective manner.



Mediation is a process of resolving disputes with the help of an independent third party, the mediator. The mediator facilitates communication between the parties, identifies the issues, and assists them in reaching a mutually acceptable solution. Mediation is a voluntary and confidential process, and the parties involved in the dispute have complete control over the outcome.



In India, mediation was first introduced in 1996 through the Legal Services Authorities Act, which established mediation as an alternative dispute resolution mechanism. In 2002, the Indian government enacted the Commercial Courts Act, which mandated the use of pre-institution mediation in commercial disputes. In 2019, the government further amended the act to establish mediation cells in all commercial courts and commercial divisions of high courts.



Mediation has many advantages over traditional litigation for MSMEs. Firstly, it is a cost-effective mechanism. Legal battles can be expensive, and MSMEs may not have the financial resources to sustain long legal battles. Mediation, on the other hand, is a quicker and cheaper option as it does not involve extensive court procedures and legal fees. Secondly, mediation is a confidential process, and the parties can avoid negative publicity and preserve their business relationship. In traditional litigation, the details of the dispute become public, and this can have a negative impact on the reputation of MSMEs. Finally, mediation is a flexible process, and the parties can craft a solution that is specific to their needs. In traditional litigation, the court decides the outcome, and the parties may not be satisfied with the verdict.


MSMEs can also benefit from mediation as it helps to maintain business relationships. In traditional litigation, the parties are often pitted against each other, and the adversarial process can damage business relationships. Mediation, on the other hand, is a collaborative process, and the parties work together to find a solution that works for both parties. This can help to preserve business relationships and create goodwill between the parties.


The government of India has also taken various steps to promote mediation for MSMEs. In 2018, the Ministry of MSMEs launched the SAMADHAN portal, an online dispute resolution portal, which provides a platform for MSMEs to resolve disputes. The portal has been designed to provide an easy-to-use platform for MSMEs to resolve disputes with their buyers and suppliers. The portal also provides free legal advice and assistance to MSMEs.


The government has also taken steps to create awareness about mediation among MSMEs. The Ministry of MSMEs has conducted various workshops and training programs to promote mediation as a dispute resolution mechanism. The Ministry has also collaborated with various organizations to provide training and support to MSMEs.



In conclusion, mediation is an effective dispute resolution mechanism for MSMEs in India. It is cost-effective, confidential, and flexible, and helps to maintain business relationships. The government has taken various steps to promote mediation for MSMEs, and it is important that MSMEs take advantage of this mechanism to resolve their disputes. Mediation can help MSMEs to save time, money and preserve their business relationships.





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