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Companies Rules – Mediation and Conciliation


Companies Rules – Mediation and Conciliation

The Companies (Mediation and Conciliation) Rules was introduced by the Government of India (GoI). The rules were laid down to bring in a panel of expert to conduct a mediation between the parties to solve the dispute that arises between them. The mediator or the conciliator takes charge of the proceedings until the dispute is solved. This article is about the Companies (Mediation and Conciliation) Rules in detail.

Panel of Mediators or Conciliators

The Regional director prepares a panel of experts and eligible person as mediators or conciliators. Moreover, the panel members will be in respect to their regions. Any person who wants to be in the panel should apply in Form MDC-1 to the Regional director. If the Regional director rejects an application, then he must give reasons for such actions in writing. The Regional director takes the application of the interested person in the month of February. After that, he updates the panel, which will become effective every year from the 1st of April.

Form MDC-1 is below for reference:

Form MDC-1

Qualification of Empanelment

There are specific qualifications to apply for the panel as mediators or conciliators. The person applying for the panel should have been either one of the following:

  • Supreme Court of India Judge
  • High Court Judge
  • District and Sessions Judge
  • Registrar or Member of a Tribunal which is set in the national level under any of the law in force
  • An officer with 15 years of experience in the Indian Legal Service or the Indian Corporate Law Service
  • A qualified legal practitioner at least for 10 years
  • Professional Chartered Accountant, Cost Accountant or Company Secretary and in continuous practice for at least 15 years
  • President or Member of any State forum
  • Trained as a mediator or conciliator

Disqualification of Empanelment

An application of the person applying to be in the panel will disqualify for the following reasons if he is:

  • Bankrupt or has a pending judgement in the insolvency
  • Convict of an offence and has a wicked behaviour in the opinion of the Central Government
  • Dismissed or removed from the Government service or the Government controlled Corporations
  • Receives punishment for any disciplinary behaviour by the disciplinary authority
  • Has an interest in the financial or other matter of disputes according to the Central Government

Application for Appointment

The concerned party can agree on the name of the mediator or conciliator for mediation or conciliation between them. If there are more than two parties and the parties are having difficulty in selecting. The Central Government, Tribunal or Tribunal Appellate (concerned authority) will request the parties to nominate and then decide the mediator or conciliator. If a person has any proceeding pending, then he will have to apply to the Central Government, Tribunal or Tribunal Appellate in Form MDC-2 along with a fee amount of Rs.1,000. On receiving the application, the concerned authority will appoint two or more experts from the panel. They can also refer to a number of experts from the panel.

Form MDC-2 is below for reference:

Form MDC-2

Deletion or Withdrawal from the Panel

The Regional Director has the authority to remove a person from the panel. But he must state a valid reason in writing for his actions. If a person wants to withdraw from the panel, then he can apply to the Regional Director with the reasons for withdrawal. The Regional Director should decide within 15 days of receiving the application and also update to the panel.

Duty of Mediator or Conciliator

If there is any reasonable doubt in carrying out the business impartially or independently, then it is the duty of the mediator or the conciliator to inform it to the concerned authority. He should also disclose these facts to the parties. The concerned authority after verifying can withdraw the appointment and appoint a new mediator or conciliator. But this can take place only when the mediator or conciliator offers to withdraw himself from the panel.

Procedure for Disposal of Matters

The following are the purposes for mediation and conciliation:

  • Fix the consultation for the parties like the time and date of each session
  • The concerned authority will decide the venue of the mediation or conciliation. If not, then the parties will jointly decide the venue
  • Conduct the meetings with the parties either jointly or separately
  • Every party must submit a memorandum regarding the issues and the necessary information 10 days before the session

If there is more than one mediator or conciliator, then nominated one can interact with others and discuss the issue. The Indian Evidence Act, 1872 or the Code of Civil Procedure, 1908 does not bind the mediator or the conciliator. They should oblige to fairness and justice while regarding the obligations and rights of the parties.

Representation of Parties

The parties should be present in the sessions either personally or through an authorised attorney. However, it requires the mediator, conciliator or the concerned authority must permit to have an authorised authority. Provided that the parties do not stay in India. The session will take place in private, where only the represented parties can be present. But for other people, it requires the consent of the mediator or the conciliator. The parties will not initiate any arbitral or judicial proceedings; he can initiate it only when there is a need to protect his rights.

Consequence of Non-Attendance

If a party does not attend a session either willfully or deliberately for two consecutive times, then the mediator or conciliator will report such matter to the concerned authority.

Administrative Assistance

The mediator or the conciliator, along with the parties, will arrange for administrative assistance by an institution or person.

Offer of Settlement

Any party at any stage of the proceeding can offer a settlement without prejudice. They should give a notice to the mediator or conciliator regarding such an offer. Any party at any stage of the proceeding can offer a settlement without prejudice. They should give a notice to the mediator or conciliator regarding such an offer.

Parties Responsible for Taking Decisions

The mediator or conciliator can only arrive at the decisions solve the dispute; they cannot impose a settlement on the parties. However, they cannot also assure that the dispute will reach a settlement. It is the responsibility of the parties to take decisions. All the parties must act in good faith to settle the dispute.

Role of Mediator or Conciliator

The mediator or conciliator can attempt to give a voluntary resolution to the disputes. They have to be a middleman and communicate the party’s views to the other. Guide the parties in identifying the issues. Attempt to reduce the misunderstanding and provide options to compromise by assisting to resolve the dispute. Emphasise and make the parties take the decisions regarding the disputes and not impose on the parties any terms of the settlement. Only if the parties require an early settlement, they can impose on terms of the settlement. If a mediator or conciliator in good faith does or omits do certain things, then he will not be liable during the proceedings.

Ethics of Mediator or Conciliator

The mediator or the conciliator must have certain ethics like:

  • Observe and follow the rules strictly and diligently
  • Conduct himself as a responsible mediator or conciliator and in a professional manner
  • Uphold integrity and fairness during the process
  • Inform the parties regarding the procedural aspects of the process
  • Disclose any relationship or interest that can affect the impartiality of the process
  • Avoid impropriety while contacting with the parties
  • Conduct faithful to confidentiality and trust that is upon them
  • Manage the dispute in accordance with the law
  • Avoid promises and guarantee of the result

If the party finds that the mediator or conciliator has violated the ethics, they can report it to the Regional director.

Time Limit for Completion

The process of mediation or conciliation should take place within 3 months from the date of the appointment of the experts for the panel. If the process is not completed within the stipulated time, then the process will be terminated. However, a certain case relating to the proceeding before Tribunal or an Appellate Tribunal can be extended after an application from the mediator, conciliator or any parties.

Confidentiality, Disclosure and Inadmissibility of Information

If a mediator or conciliator receives information from one party regarding the dispute, then he must disclose it to the other party. But if the party wants the information to be confidential, then he cannot disclose it. The receipts, perusal or preparation of records should be confidential. He cannot expose the information from the documents. There should be no video or audio recordings of the proceedings. The parties have to maintain confidentiality in the events of the process. They cannot speak of the views of the parties, confidential documents and the proposals of the proceedings at any other proceedings. There cannot be any recording of the statements of the parties.

Communication between the Mediator or Conciliator and the Concerned Authority

To preserve the confidentiality of the parties in the concerned authority, the concerned authority will not have any communication with the mediator or the conciliator. However, if there is any communication between them, then it will be in writing. The parties will receive copies of the writing. The communication is limited for the following by the mediator or conciliator:

  • If the party does not attend the session
  • Consent of the parties
  • His assessment if the case does not reach a settlement
  • Regarding the settlement

Settlement Agreement

If the parties reach with an agreement for the dispute, then it will be taken in writing and signed by both the parties. If a counsel represents the parties, then their signature is also mandatory. The parties should submit the agreement to the mediator or the conciliator. They will submit it to the concerned authority with a covering letter with their signature in it. If the parties do not reach an agreement, then the mediator or the conciliator will submit that note also to the concerned authority.

The concerned authority will fix a date for hearing the settlement. This will be 14 days after the receipt of the mediator or the conciliator. The concerned authority will pass an order if the disputes are settled. If certain disputes are remaining, then the concerned authority will decide upon those disputes.

Expenses of the Proceedings

Before the start of the proceedings, the concerned authority fixes consolidated fees for the mediator or the conciliator. The parties will take care of the expenses of the proceedings. Otherwise, the concerned authority directs someone to bear the expenses. The mediator or the conciliator will direct the parties to deposit an equal share for the probable cost. If a party fails to pay the amount, then the concerned authority will take action after receiving an application regarding this. The proceedings will begin only after the deposit of the amount.

Matters not Relating to Mediation or Conciliation

The following are the matters that do not relate to the mediation or conciliation:

  • Inspection or Investigation under the ChapterXIV of the Companies Act, 2013
  • Serious and specific allegations of fabrication of documents forgery, fraud, impersonation or coercion
  • Prosecution for non-compoundable offences and criminal
  • The public interest or interest of the person apart from the parties