What kinds of matters / disputes can be referred to mediation / conciliation under the Companies (Mediation and Conciliation) Rules, 2016?
In exercise of Section 442 of the Companies Act, 2013, the disputes pending with the Central Government, NCLT or the NCLAT can be referred to mediation or conciliation process. Any matter pending before the Central Government, Tribunal or Appellate Tribunal under the Companies Act, 2013 can be referred for mediation either by the parties themselves or suo moto by the Central Government.
Given that there are three authorities before whom the pending proceedings can be referred to mediation, let us consider which are the disputes which would come before the Tribunal / Appellate Tribunal or Central Government under the Companies Act.
The powers of NCLT encompass all matters which were dealt with by the erstwhile CLB, powers of the erstwhile BIFR under the Sick Industrial Companies (Special Provisions) Act, 1985, erstwhile powers of High Court in relation to winding up, compromise and arrangement and erstwhile powers of Central Government for conversion of public company into private company. Some important matters which will be placed before NCLT can be listed as class action suits, deregistration of companies, oppression and mismanagement, refusal to transfer shares, matters relating to deposits and reopening of accounts, revision of financial statements. The parties in the disputes before the NCLT can include a group of shareholders in cases of class action suits and oppression and mismanagement, the concerned Company itself and can also include the Registrar of Companies (particularly in relation to reopening and revision of financial statements). The National Company Law Appellate Tribunal (NCLAT) is the appellate authority for orders issued by the NCLT and does not have any original jurisdiction, so the matters will be the same. However, what is implied is that a matter which was decided by the NCLT and is pending in appeal before NCLAT can be mediated upon by the parties.
The matters before Central Government are mainly approval matters such as approval for removal of auditors (Section 140(1)). In this case the parties involved would include the concerned Company and the auditor who is being removed.
As per the Companies (Mediation and Conciliation) Rules, 2016, the following matters cannot be referred to mediation or conciliation, namely:
matters relating to proceedings in respect of inspection or investigation; or the matters which relate to defaults or offences for which applications for compounding have been made by one or more parties.
- cases involving serious and specific allegations of fraud, fabrication of documents forgery, impersonation, coercion etc.
- cases involving prosecution for criminal and non-compoundable offences.
- cases which involve public interest or interest of numerous persons who are not parties before the Central Government or the Tribunal or the Appellate Tribunal as the case may be.
At what stage of the legal proceeding can a reference be made to mediation / conciliation? Who makes the reference?
A matter can be referred to mediation / conciliation while it is pending stage before the Central Government or the Tribunal or the Appellate Tribunal. It can be referred either by the contesting parties or suo moto by the Central Government, Tribunal or Appellate Tribunal.
How is the mediator / conciliator appointed? What kind of freedom do the parties have to appoint a mediator / conciliator of their choice?
Under Rule 3 of the said rules, the Regional Director shall prepare a list of experts, who are interested in getting empanelled as mediator/conciliator and possess requisite qualification. Names of experts who are on the panel will be displayed on the website of Ministry of Corporate Affairs or any other website as notified by Central Government. The current status of the Mediation and Conciliation Panel for different regions is displayed.
As per Rule 6(1), parties are entitled to choose a mediator/conciliator by themselves from within the mediation / conciliation panel created by Central Government (delegated Authority is Regional Director per Rule 3), in case there are more than two parties and there is no consensus arrived, the Central Government or the Tribunal or the Appellate Tribunal may make ask each party to nominate one mediator each or Central Government, Tribunal or Appellate Tribunal may itself make such appointment as deemed fit from the panel.
How is this different from mediation / conciliation under the Legal Services Authority Act or ordinary court-annexed mediation (say, under Delhi High Court Mediation Rules)?
Private mediation, as explained below, is with respect to contractual matters only, where mediation has been provided for under the contract. Similarly, mediation under the Code of Civil Procedure arises from civil proceedings or civil causes of action which are brought before the court (these may be arising from contract or other civil rights, such as property rights or matrimonial rights).
Ordinarily, mediation and conciliation are possible only within the context of these relationships. Regulatory disputes or those arising within statutory relationships are typically not capable of settlement by mediation, but the Companies (Mediation and Conciliation) Rules, 2016 are an exception.
Mediation and conciliation under the Companies (Mediation and Conciliation) Rules, 2016 pertains to transactions pursuant to statutory relationships (for example, those arising between a company and its shareholder, which are not restricted to a contract but to an entire series of transactions involving the company).
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.