An important, yet under-reported, aspect in the new Companies Act 2013 is the introduction of mediation as an alternative dispute resolution mechanism. Under Section 442 of the Act, the National Company Law Tribunal (NCLT), its appellate body — the National Company Law Appellate Tribunal (NCLAT) — and the Centre can refer cases for settlement through mediation.

WHAT IS MEDIATION?

Mediation and conciliation have gained popularity in other countries. In India, the conciliation process was introduced in the Industrial Disputes Act, 1947 and, later, under the Arbitration and Conciliation Act, 1996. In 1999, mediation was specifically recognised in amendments made to the Code of Civil Procedure, 1908. Ever since, courts are empowered to refer a case for resolution through mediation or conciliation at the parties’ request, or if the court feels the case has elements of settlement.

It is the process by which the parties to a dispute have closed-door discussions on a contentious issue in the presence of neutral mediator(s). This is a voluntary process and is undertaken only if all the parties are willing to go by it. The mediator, who is specially trained, helps the parties move from their positions, towards assessing where their interests are. Then, s/he helps the parties determine how the matter can be settled, examining various options. Unlike formal adjudicatory processes, the mediation need not be confined to the issues raised in the case, but can go beyond to other matters the parties want resolved. They can also agree to disagree on some issues, while resolving the rest.

Mediation is a time-bound, private and confidential process. The information shared must be kept confidential by all parties, including the mediator. This facilitates a free and frank discussion on matters in dispute . Equally important, the discussions cannot be brought up before the court if the disputes are not resolved through mediation.

The Centre has proposed mediation as a process to “attempt to facilitate voluntary resolution of thedispute(s) by the parties, and communicate the view of each party to the other, assist them in identifying issues, reducing misunderstandings, clarifying priorities, exploring areas of compromise and generating options in an attempt to resolve the dispute(s), emphasising that it is the responsibility of the parties to take decision which affect them.”

The conciliation process is similar to mediation. But the conciliator suggests terms for settlement on her evaluation of the issues discussed by the parties.

In mediation, the mediator does not suggest the manner of settlement to the parties. Any settlement arrived at using either process is voluntary. No settlement can be imposed by the mediator or conciliator.

The new Companies Act provides for the composition of a Mediation and Conciliation Panel by the Centre, comprising mediators with prescribed qualifications, to whom the government, the NCLT and the NCLAT will refer cases. A period of three months has been provided for the completion of the mediation process.

The Act also provides for the mediators to make recommendations on the resolution of the case to the referring authority.

The fees for the mediation process, qualifications of mediators, and procedures to be followed in the mediation process are to be prescribed by rules. In October 2013, the Centre published draft rules on this and is in the process of finalising them.

A WIDER AMBIT

Compared to the jurisdiction exercised by the Company Law Board (CLB) under the 1956 Companies Act, the jurisdiction of the NCLT is considerably wider. In addition to the jurisdiction of the CLB, the NCLT will hear all company cases that are currently under the jurisdiction of the high courts and the Board for Industrial and Financial Reconstruction (BIFR), including cases relating to winding up of companies, mergers, revival of sick companies, oppression, minority and class action proceedings.

The Centre will exercise powers under the new Companies Act in certain disputes --- such as those relating to the adoption of the name of a company, claims in summary proceedings for winding up, where the rights of parties are determined by the Government. Mediation will play an important role in all such proceedings.

Further, referral to mediation can also take place at the appellate stage by the NCLAT, which hears appeals from orders from the NCLT. The accommodation of mediation in the Act as a way of resolving cases involving companies is significant as a policy measure.

While resolution through settlement has always been an option for parties, the neutral mediator plays an important role in bringing them to the negotiating table. Mediation can form the basis for a continuing commercial relationship.

(The author is a mediator and partner at the Chennai-based law firm Vichar Partners.)

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