Statutory Mediation and Conciliation under Companies Act, 2013
Relevance of statutory mediation under Companies Act
Section 442 of the Companies Act, 2013 introduced mediation as an alternate dispute resolution mechanism within the framework of the Companies Act, 2013. For implementation of this section, the Companies (Mediation and Conciliation) Rules, 2016 (Rules) have been notified on 9th September 2016.
State-specific high courts already have separate mediation rules - parties can be referred by the relevant civil court where proceedings are initiated to arbitration, mediation or conciliation, as the court may see fit (in accordance with the provisions of the Code of Civil Procedure, 1908).
However, these rules apply to civil proceedings only. In company law proceedings arising from the Companies Act, 2013, rights and obligations are different from ordinary civil proceedings. They arise from specific statutory rights and relationships (i.e. those of a company with its shareholders or other stakeholders under the Companies Act, 2013). Further, the company law jurisdiction of High Courts and the jurisdiction of the former Company Law Board has been transferred to the National Company Law Tribunal.
The Companies (Mediation and Conciliation) Rules, 2016 (issued pursuant to Section 442 of the Companies Act) create the opportunity to resolve some such regulatory disputes between the company and other entities through mediation and conciliation. If these rules were not enacted, the only way to resolve such disputes would have been through the statutory body mentioned under the relevant provisions of the Companies Act, 2013, i.e. National Company Law Tribunal, the National Company Law Appellate Tribunal or the Central Government.
This mediation or conciliation takes place through mediator/conciliator appointed from the panel created by the Central Government called as the Mediation and Conciliation Panel. Proceedings initiated before the Central Government or National Company Law Tribunal (NCLT) or National Company Law Appellate Tribunal (NCLAT) can be resolved through mediation or conciliation. Please note that the settlement agreement arrived at is not directly enforceable, but is enforceable as the order of the relevant authority under the Companies Act, 2013.
Section 442(1) states that the mediation and conciliation panel is “for mediation between the parties during the pendency of any proceedings.” Thus, the statutory focus seems to be on only “mediation”. The Rules also seem to consider conciliation and mediation to be the same. For example Rule 17 of Rules, describes “role of mediator or conciliator”. However, in ADR processes generally, “conciliation” and “mediation” are fundamentally different.
A mediator facilitates discussion between the parties directly or by communicating with each other through the mediator, by assisting parties in identifying issues, reducing misunderstandings, clarifying priorities, exploring areas of compromise, generating options in an attempt to solve the dispute and emphasising that it is the parties’ own responsibility for making decisions which affect them. The outcome of a mediation is a settlement agreement, which is binding only as a contract.
A conciliator, in exercise of his powers under Sections 67 and 73 of the Arbitration and Conciliation Act, 1996 makes proposals for a settlement of the dispute by formulating or reformulating the terms of a possible settlement. The outcome of a conciliation becomes statutorily binding through the provisions of the Arbitration and Conciliation Act.
We will not examine specific differences between mediation and conciliation here, but the unique mechanism introduced under Companies Act, 2013 to enable parties to use either of these mechanisms to resolve disputes.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.