Rules soon to usher in effective ‘mediation’ facility for corporates

The Corporate Affairs Ministry will soon come out with rules on ‘mediation’ under the new company law, a senior official said.

Mediation, which is an alternative to traditional litigation, has proven effective and is gaining currency in the developed world. Besides, being confidential and non-binding, mediation is also relatively faster and inexpensive as compared to litigation.

The necessary infrastructure in terms of mediation centres will also be provided along with the National Company Law Tribunal (NCLT), which is expected to soon be a reality, AK Chaturvedi, Regional Director (Northern Region), Corporate Affairs Ministry, told BusinessLine .

“Mediation is good for all corporates and the litigants. It will reduce time and costs for corporates,” said Nesar Ahmad, Past President of Company Secretaries Institute.

In India, arbitration, which is also an alternative to traditional litigation, has not really taken off.

Both mediation and arbitration employ neutral third party to oversee the process. Arbitration is generally conducted with a panel of multiple arbitrators who take on the role of a judge. On the other hand, mediation is generally done with a single mediator who does not judge the case.

The mediator simply helps to facilitate discussion and eventual resolution of the dispute.

It may be recalled that a Constitution Bench of the Supreme Court had on May 12 last year upheld the validity of the NCLT and the National Company Law Appellate Tribunal. This had paved the way for setting up of these tribunals.

However, the apex court had held as “invalid” the provisions of the Companies Act, 2013 in regard to the appointment of technical members, and to the composition of the selection committee.

The Bench had held that for the appointment as technical members of NCLT, officers who are holding the ranks of Secretaries or Additional Secretaries alone can be considered.

Under the new company law, the original jurisdiction of company courts with regard to winding up, mergers and amalgamations, operation and mis-management, class action suits and insolvency now rests with the NCLT.

All the corporate jurisdictions have now been moved away from High Courts and earmarked to the NCLT.

“The first point of interaction for corporates is now going to be NCLT, which under the new Company law will have to refer the matter to mediation Centres,” said Ahmad.

COMMENT NOW