Mediation: A cost effective tool for resolution of disputes for MSMEs

Mediation can really benefit MSMEs as it offers level playing field for them and costs less and take less time. Globally, only 2 per cent of mediated settlements have problems in implementation
Mediation: A cost effective tool for resolution of disputes for MSMEs

Mediation can really benefit MSMEs as it offers level playing field for them and costs less and take less time. Globally, only 2 per cent of mediated settlements have problems in implementation.

 

It is estimated that India has over 75 million micro, small and medium enterprises (MSMEs) that contribute 40 per cent to the gross domestic product. Yet, they have limited financial resources with banks often overlooking their needs. At the same time, big corporates and PSUs often delay payments of MSME suppliers; thus, impacting their working capital. According to reports, large corporations owe Rs 40,000 crore and PSUs Rs 48,000 crore to MSMEs. 



 

MSMEs are often hesitant to take the legal route fearing high litigation cost and long duration taken by courts to settle the disputes. Government has been trying its best to lessen pain points of MSMEs, but situation on the ground has not changed much. MSMEs are also unaware of other dispute resolution mechanism besides litigation and arbitration routes.

 

Globally, mediation has emerged as a mechanism of choice to resolve disputes between conflicting parties. In fact, its effectiveness was acknowledged even by UN Secretary-General Antonio Guterres, while addressing the UN Security Council in June 2019, when he said conflict prevention and mediation are vital to reduce human suffering. 

 

Many people believe mediation and arbitration are same. But in reality, they are as different as chalk and cheese. Arbitration is often costly and time consuming. On the other hand, mediation is less costly and takes much lesser time.

 

Mediation is a process of solving a dispute between two disputing parties with a help of a trained professional, called the mediator, by finding a solution, if any, which is mutually agreeable to the two parties.

 

A very high percentage of mediation cases (some estimate it at 70 per cent) end up resolving the dispute with a final settlement. Globally, only 2 per cent of mediated settlements have problems in implementation.

 

It is time to spread the awareness of benefits of mediation to businesses, especially MSMEs, in India. Even the MSMED Act provides for Micro and Small Enterprise Facilitation Council (MSEFC) for payment disputes, etc and facilitation council has the power to engage an outside body as per the act.

 

Mediation can really benefit MSMEs as it offers level playing field for them and costs less and take less time.

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