Mediation And Conciliation Under

Companies Act, 2013

Chinmay Gosavi
Introduction

• The government has recently notified the Companies Mediation and Conciliation
Rules, 2016 (‘Rules’), pursuant to its powers to implement provisions of the
Companies Act, 2013 (‘Act’), under s. 469 of the Act. These rules give teeth to s.
442 of the Act, which, is a new and welcome provision that enables settlement of
disputes through ‘alternate dispute resolution’.

• It gives parties the option to refer proceedings pending before the Central
Government, Tribunal or Appellate Tribunal, at any stage, to mediation
conducted by the Mediation and Conciliation Panel (‘Panel’). As per the Rules,
this Panel will consist of judicial experts (like ex-judges, experienced legal
practitioners, ex-member of tribunal/ national or state commissions), or experts
particularly within the field of corporate law (like experienced Chartered
Accountants, Cost Accountants or Company Secretaries). In addition, the Central
Government, the Tribunal or the Appellate Tribunal also have the power to suo-
moto refer a dispute to the Panel. 
Objective

“To study Mediation And Conciliation Under

Companies Act, 2013 and discuss
Practical Aspects of Act and Rules Made
Thereunder.”
Need For Mediation

• The Companies Act 2013 has introduced Mediation, as an Alternative

Dispute Resolution Mechanism in the Companies Law Disputes, which
is relatively inexpensive while seeing a case through trial is an
expensive proposition.
• Mediation does not run by a clogged court schedule and sessions can
be easily scheduled any time at the mutual convenience of the parties
and the mediator, and can take place in a variety of locations. Above
all Mediation provides for a Win-Win conflict settlement.
• The Act for the first time gives a legislative mandate to Central
Government to maintain a panel of experts to be called Mediation
and Conciliation Panel for mediation between disputing parties.
Overview
• Role of the mediator or conciliator - The
mediator or conciliator shall facilitate
voluntary resolution of disputes of the parties
by communicating the view of each party to
the other, assist them in identifying issues,
reduce misunderstanding, and explore areas
of compromise. 

• Mediator or conciliator not bound by the

Indian Evidence Act, 1872 or Code of Civil
Procedure, 1908 – The mediator or conciliator
shall be guided by the principles of fairness
and natural justice, having regard to the rights
and obligations of the parties and the
circumstances of the dispute.
Overview

• Time frame for completion of mediation or

conciliation – The total time frame provided
to the mediation and conciliation panel is
three months from the date of appointment
of the expert, which can be extended for
another three months. In essence, dispute
resolution through these modes is capped
at six months.
• Decision of the mediator or conciliator not
binding upon the parties – The Rules state
that the parties should mutually arrive at a
decision to resolve the dispute through
mediation and the mediator or the
conciliator cannot impose a decision on the
parties.
Overview

• Matters which cannot be referred to

mediation and conciliation - Certain
criminal, non-compoundable matters,
such as those involving allegations of
fraud and public interest cannot be
submitted to mediation or
conciliation.
Mediation and conciliation – Are they two sides
of the same coin?

The heading of section 442 of the Companies Act is ‘Mediation and Conciliation Panel’.
However, Section 442 (1) states that this panel is for ‘mediation’ between the parties
during any pending proceedings before the Central Government, the NCLT or the
NCLAT under the Companies Act, which uses the terms ‘mediation’ and ‘conciliation’
interchangeably. Further, there is no difference in the role, qualifications,
disqualifications or procedures to be adopted by the mediator or conciliator for the
resolution of disputes as per the Rules.
Non-binding nature of mediation

The success of mediation in resolving disputes is largely dependent upon the bona
fide use of the process. Due to the non-binding nature of mediation, there arises a
risk that a party with a mala fide intention may agree the negotiation in order to delay
the delivery of justice rather than expedite it. While the principle behind the Rules is
to offer the parties every opportunity to resolve the dispute in an amicable manner,
the threat of both entities resorting to mediation as dilatory tactics cannot be
avoided.
Practical Aspects of
Mediation And Conciliation
Under Companies Act, 2013
and Rules Made
Thereunder :
 • The basic provision lies with Rule 27 wherein it is
directed that Central Government or Tribunal or
Appellate Tribunal, as the case may be, are empowered
to fix the fee of mediator or conciliator. It is also
How to meet suggested that as far as possible a lump sum fees be
charged rather than for each session or meeting.
the expenses
of mediation • The mediator or conciliator is empowered to direct
contesting parties to deposit estimated cost of mediation
and proceedings before it’s commencement. If at any stage,
conciliation ? either party refuses or abstains from depositing such
costs, the mediator/conciliator can make an application
to the Central Government, Tribunal or Appellate
Tribunal under this Act which shall direct the parties to
pay, failing which the mediation/conciliation shall be
deemed to be terminated.
 Section 442(6) of the Act provides relief to aggrieved
Remedies party. It says any person aggrieved from the decision of
available to mediation or conciliation panel may file the objection to
Central Government, Tribunal or Appellate Tribunal.
the aggrieved However under Rule 14, if a party fails to attend two
party  consecutive sessions of the mediation or conciliation
proceeding, the mediation/conciliation shall be deemed
to be failed. So in such case party cannot seek relief
under section 442(6) of the Act.
Failure or
Rule 25 clearly states that a settlement agreement
Refusal to needs to be signed by the parties before submitting
sign it to the Central Government or the Tribunal or the
Appellate Tribunal. Thus if any party fails or refuse to
Settlement sign the settlement agreement, the
Agreement mediation/conciliation is deemed to be failed. 
Can signed As per the Act and Rules there is no express
agreement be provision as to appeal or challenge the agreement
once signed and forwarded to the Central
challenged Government or the Tribunal or the Appellate
by a party ? Tribunal. However the agreement can be challenged
as per grounds given under Indian Contract Act 1872
such as Free Consent, Fraud, Unlawful object etc.
 • Rule 26 states that the Central Government or the
Tribunal or the Appellate Tribunal, after receiving
Enforcement of report from mediator/conciliator shall within 14
days, pass such orders as agreed by the parties
Settlement under settlement agreement.
Agreement • Thus, the settlement agreement would have the
force of the authority’s order under the statute.
However, if there are only certain disputes that are
settled between the parties, the Central
Government or the Tribunal or the Appellate
Tribunal shall decide the remaining issues itself.
What happens if • If a party is not satisfied with the way proceedings
parties are not are going it has option not to attend the
proceedings and not to sign settlement agreement
satisfied with which will eventually lead to failure of
the way the mediation/conciliation.
proceedings are • In such case Rule 14 would apply which clearly
going? How can states that if a party deliberately and willfully
absents itself from attending two consecutive
the process be meetings, the process of the mediation and
terminated ? conciliation shall fail and a report shall be
submitted by the mediator to Central Government,
Tribunal or Appellate Tribunal.
• This outcome could arise before the stipulated 90-
day period as well. Absence is probably the fastest
way out if proceedings are not acceptable.

• The rules are silent on the provisions of an appeal,

but as we discussed earlier, as per Section 442(6) of
Companies Act, 2013 a party aggrieved from the
decision of the mediation panel may file the
objections to the Central Government, Tribunal or
Appellate Tribunal.

• The grounds on which the objections can be filed

have not been specified. The Central Government,
Tribunal or Appellate Tribunal will then adjudicate
the matter by itself.
Conclusion
• These provisions have been enacted primarily to reduce the
judicial burden on the relevant authorities mentioned, i.e., the
Central Government, Tribunal and the Appellate Tribunal.

• Principally, mediation as a method of dispute resolution is

viable for disputes under the Act, since it can lead to efficient
and commercially viable means to resolve disputes between
parties. At the same time providing parties with the protection
of confidentiality of information and prohibition of use of such
of the information in any other proceedings.

• This is especially relevant, since, mediation is not as time

consuming a process, as adjudication before Courts, Tribunals
or even arbitral tribunals. Accordingly, if a relevant expert is
appointed as the Mediator, which the Rules seem to take into
account, the Rules have the potential to become a very
popular method of amicably resolving disputes.