Mediation / Conciliation is a settlement effort which utilizes the services of an impartial, third-party mediator in an effort to reach an agreement to the dispute. Mediation in most of the cases would be facilitative, encouraging the parties to settle the issues by the intervening procedure by the Mediator. On the other hand there is a slight difference in the case of conciliation, where the Conciliator (most commonly referred as Mediator itself) tend to take the procedure to evaluative mediation. The parties in a mediation can agree to conciliate at any point of time. Conciliation is formally recognized in India by the Arbitration & Conciliation Act, 1996 and the conciliated settlement agreement is given the same status as of a court decree.

Mediation is a process in which a neutral third person, the mediator, encourages and facilitates the resolution of a dispute between two or more parties. It is an informal and non-adversarial process, which has the objective of helping the disputing parties reach a mutually acceptable and voluntary agreement.

The mediator is not given any power to impose a settlement. His function is to try to break any impasse and encourage the parties to reach an amicable settlement. In commercial disputes an impasse most often arises from either a lack of trust in the integrity of the other party or a genuine lack of good faith or difference of opinion on the facts underlying the dispute or on the difference of opinion on the probable outcome of the case when it goes to court. The mediator may act as a shuttle diplomat acting as a channel for communication, filtering out the emotional elements and allowing the parties to focus on the underlying objectives. He will encourage the parties to reach an agreement themselves as opposed to having it imposed upon them.
 
Parties are generally more satisfied with a mediated resolution, rather than one imposed upon them such as happens with a court judgment, because the parties created the solution themselves. In recent years, the use of binding mediation has developed as an alternative to arbitration and incorporates the negotiation aspects of mediation with the certainty of an outcome. Mediation is also much less costly than arbitration and protracted litigation.

Unlike in regular court litigation, in a mediation proceeding, each party may, on his own initiative or at the invitation of the mediator, submit to the mediator suggestions for settlement of the dispute. When it appears to the mediator that there exist elements of a settlement, which may be acceptable to the parties, he shall formulate the terms of a possible settlement and submit them to the parties for their observations. After receiving the observations of the parties, the mediator may reformulate the terms of a possible settlement in the light of such observations. If the parties reach agreement on the settlement of the dispute, they may draw up and sign a written settlement agreement. If requested by the parties, the mediator and the Institution may draw up, or assist the parties in drawing up, the settlement agreement. When the parties sign the settlement agreement, it shall be final and binding on the parties and persons claiming under them respectively and it shall have the same status of a decree of a court of law.
 
The use of binding and non-binding mediation has increased greatly in both the private and public sectors, particularly for legal and business disputes. Many companies have chosen to insert mediation clauses into standard contracts as a preliminary dispute resolution step before arbitration or litigation.

Mediation can also be made of present or future disputes where the parties seek amicable settlement of such disputes by an agreement to mediate.

To provide finality to a dispute resolution clause, many parties include an arbitration provision, in the event their dispute is not settled during mediation. Essentially, an arbitration clause follows the mediation clause, and requires the parties to submit all disputes not settled in mediation to a final and binding arbitration. The mediator should never serve as an arbitrator in a subsequent arbitration, since he or she will have been exposed to confidential communications during the mediation process.

Mediation proceedings are settlement negotiations, and all offers, promises, conduct and statements, whether written or oral, made in the course of the proceedings, are inadmissible in any litigation or arbitration of their dispute. However, evidence that is otherwise admissible shall not be rendered inadmissible as a result of its use in the mediation session. Any information disclosed to the mediator in a private meeting shall remain confidential unless the party agrees that it may be disclosed.