THE COMPANIES (MEDIATION AND CONCILIATION) RULES, 2016 – AN OVERVIEW

[Mr. M. GOVINDARAJAN]

The Government has made ‘The Companies (Mediation and Conciliation) Rules, 2016 (‘Rules’ for short) vide Notification dated 09.09.2016.  The said rules came into effect from 09.09.2016.  The Rules contains 30 Rules.  The Rules prescribes the procedure for the empanelment of mediator or conciliator, their qualifications, disqualifications, appointment of mediator or conciliator, time limit for conducting mediation or conciliation, procedure for conducting mediation or conciliation, effect of the finalization of mediation or conciliation etc.,

Panel of mediators or conciliators

Rule 3 provides the procedure for preparing a panel of mediators or conciliations which is described as below:

• The Regional Director shall prepare a panel of experts willing and eligible to be appointed as mediators or conciliators in the respective regions;
• The panel shall be placed on the web site of the Ministry of Corporate Affairs or on any other web site as may be notified by the Central Government;
• The Regional Director may invite applications from persons, having necessary qualifications,interested in getting empanelled as a mediator or conciliator ;
• An eligible person shall apply to the Regional Director in Form MDC – 1;
• The Regional Director shall invite applications from persons interested every year during the month of February and update the panel which shall be effective from 1^st April of every year;
• For the financial year 2016 – 17, the Regional Director may call for applications from the persons interested within 60 days from 09.09.2016 and prepare the panel for the current financial year within a period 30 days.
• If the application is rejected by the Regional Director, he shall record the reasons in writing for the same.

Qualifications for empanelment

Rule 4 provides the qualifications for empanelment as mediator or conciliator.  The person shall have any one of the following qualifications –

• has been a Judge of the Supreme Court of India; or
• has been a Judge of a High Court; or
• has been a District and Sessions Judge; or
• has been a Member or Registrar of Tribunal constituted at the National level under any law for the time being in force; or
• has been an officer in the Indian Corporate Law Service or Indian Legal Service with 15 years experience; or
• is a qualified legal practitioner for not less than 10 years; or
• is or has been a professional for at least 15 years of continuous practice as Chartered Account or Cost Accountant or Company Secretary; or
• has been a Member or President of any State Consumer Forum; or
• is an expert in mediation or conciliation who has successfully undergone training in mediation or conciliation.

Disqualifications for empanelment

Rule 5 provides for the disqualifications for being empanelled as mediator or conciliator, if he-

• is an undischarged insolvent or has applied to be adjudicated as an insolvent and his application is pending;
• has been convicted for an offence which, in the opinion of the Central Government, involves moral turpitude;
• has been removed or dismissed from the service of the Government or the Corporation owned or controlled by the Government;
• has been punished in any disciplinary proceeding, by the appropriate disciplinary authority; or
• has, in the opinion of the Central Government, such financial or other interest in the subject matter of dispute or is related to any of the parties, as is likely to affect prejudicially the discharge by him of his functions as a mediator or conciliator.

Withdrawal from panel

Rule 8 provides that any person who intends to withdraw his name from the panel may make an application to the Regional Director.  In his application he is to indicate the reasons for such withdrawal.  The Regional Director shall take a decision within 15 days of the receipt of the application and update the panel accordingly.

Deletion from the panel

Rule 7 provides that the Regional Director may by recording reasons in writing and after giving him reasonable opportunity of being heard, remove any person from the panel.

Appointment of mediator or conciliator

Rule 6 provides that the parties concern may agree on the name of the sole mediator or conciliator for mediation or conciliation between them.  If two or more sets of parties are there and it is unable to agree on a sole mediator or conciliator the Central Government or the Tribunal or the Appellate Tribunal may ask each party to nominate the mediator or conciliator or the Central Government or the Tribunal or the Appellate Tribunal may appoint the mediator or conciliator, as may be deemed necessary for mediation or conciliation between the parties.

The application for this purpose shall be in Form No. MDC – 2.  The application shall be accompanied by a fee of ₹ 1000/-.   On receipt of the application the Central Government or the Tribunal or the Appellate Tribunal shall appoint one or more experts from the panel.

The Central Government or the Tribunal or the Appellate Tribunal, as the case may be, before which any proceeding is pending may, suo motu, refer any matter pertaining to such proceeding to such number of experts from the panel, if it deems fit in the interest of parties.

Withdrawal of appointment

Rule 9 provides that the mediator or conciliator shall require to disclose about any circumstances which may give rise to a reasonable doubt as to his independence or impartiality in carrying out his functions.   Every mediator or conciliator shall from the time of his appointment and throughout continuance of the proceedings, without any delay, disclose to the parties about the existence of doubts.

Rule 10 provides that Central Government or the Tribunal or the Appellate Tribunal, on receipt of the disclosure from the concerned person, if it is satisfied that such disclosure or information has raised a reasonable doubt as to the independence or impartiality of such person, may withdraw the appointment of that person and appoint any other person as mediator or conciliator from the panel.  The mediator or conciliator may also offer to withdraw the appointment and request for the appointment of any other mediator or conciliator.

Matters not to be referred to mediation or conciliation

Rule 30 provides that the following matters shall not be referred to mediation or conciliation-

• the matters relating to proceedings in respect of inspection and 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.

Procedure

The following is the procedure to be adopted in mediation or  conciliation proceedings –

• The mediator or conciliator shall fix the dates and the time of each mediation or conciliation session in consultation with the parties so as to enable them to be present;
• The mediation or conciliation shall be held at the place decided by the Central Government or the Tribunal or the Appellate Tribunal, as the case may be, or such other place where the parties and the mediator or conciliator jointly agrees;
• A joint or separate meetings may be conducted with the parties;
• Each party shall, ten days before a session, provide to the mediator or conciliator a brief memorandum setting forth the issues and his position for these issues and all information required to understand the issue.A copy of such memorandum shall also be given to the opposite party or parties;
• In suitable case the above mentioned parties may be reduced at the discretion of the mediator or conciliator;
• Where there is more than one mediator or conciliator, the mediator or conciliators may first concur with the party that agreed to nominate him and thereafter interact with the other mediator or conciliator, with a view to resolve the dispute.
• The parties shall be present personally or through an authorized attorney;
• The parties may be represented by an authorized person or counsel with the permission of the mediator or conciliator;
• The party may also be directed to be present in person in any of the hearing;
• Where the party is not residing in India may be represented by his or her authorized representative with the permission of the mediator or conciliator for allsessions or meetings;
• The mediator or conciliator shall not be bound by the Indian Evidence Act while disposing he matter, but shall be guided by the principles of Natural Justice, having regard to the rights and obligations of the parties, usages of trade, if any, and the circumstances of the dispute;
• If a party fails to attend the meeting for two consecutive terms, the proceedings shall be deemed to have end the same shall report to the Central Government or the Tribunal or the Appellate Tribunal;
• The mediator or conciliator, with the consent of the parties may arrange for administrative assistance by a suitable institution or person;
• In the midst of the proceedings the parties may arrive at a settlement with the other party;
• The mediator or conciliator shall attempt to facilitate voluntary resolution of the dispute by the parties and communicate the views of each party to the other, assist them in identifying the issues, reducing misunderstandings, clarifying priorities, exploring areas of compromise and generating options in an attempt to resolve the dispute;
• The parties shall be made to understanding that the mediator or conciliator facilitates in arriving a decision to resolve the dispute.He shall not and cannot impose any settlement.He cannot give any assurance that the mediation or conciliation shall result in a settlement and he shall not imposed any decision on the parties;
• On consent of the parties the mediator or conciliator may impose such terms and conditions on the parties for early settlement of the dispute as he may deem fit;
• The proceeding shall be completed within 3 months from the date of appointment of expert from the panel;
• On the expiry of the three months the proceedings shall stand terminated;
• In case of mediation or conciliation in relation to any proceedings before the Tribunal or the Appellate Tribunal which could not be completed within 3 months, the Tribunal or the Appellate Tribunal, on the application of the mediator or conciliator or any of the part, extend the period for the proceedings by such period not exceeding 3 months;
• All the parties shall commit to participate in the proceedings in good faith with the intention to settle the dispute;
• When a mediator or conciliator receives factual information concerning the dispute from any party, he shall disclose the same to the other party, so that the other party may have an opportunity to present such explanation as it may consider appropriate;
• When a party gives information to the mediator or conciliator subject to a specific condition, such information may be kept confidential;
• The mediator or conciliator shall not disclose that information to other party;
• The entire proceedings shall be confidential and the mediator or conciliator shall not be compelled to divulge information regardingthose documents nor as to what transpired during the mediation or conciliation before the Central Government or the Tribunal or the Appellate Tribunal or any other authority or any person or group of persons.
• The parties shall maintain confidentiality in respect of events that transpired during the mediation and conciliation and shall not rely on or introduce the said informationin otherproceedings as to-

• Views expressed by a party in the course of the mediation or conciliation proceedings;
• Documents obtained during the proceedings which were expressly required to be treated as confidential or other notes, drafts or information given by the parties or the mediator or conciliator;
• Proposals made or views expressed by the mediator or conciliator;
• Admission made by the party in the course of proceedings;

• There shall be no audio or video recording of the proceedings;
• No statement of parties or the witnesses shall be recorded by the mediator or conciliator;
• The proceedings shall be conducted in privacy;
• Other persons may attend only with the permission of the parties and with the consent of mediator or conciliator;
• During the proceedings there shall be no communication between the mediator or conciliator and the Central Government or the Tribunal or the Appellate Tribunal in the subject matter;
• If any communication is necessary it shall be in writing and copies of the same shall be given to the parties or the authorized representative;
• Such communication shall be limited to communication by mediator or conciliator about the failure of the party to attend; about the consent of the parties; about his assessment that the case is not suited for settlement through mediation or conciliation; about settlement of dispute between the parties;
• Where an agreement is reached between the parties in regard to all the issues or some of the issues, the same shall be reduced in writing signed by the parties and if any counsel has represented the parties,the conciliator or mediator may also obtain the signature of such counsel on the settlement agreement;
• The agreement shall be signed and submitted to the mediator or conciliator;
• The mediator or conciliator shall forward the same to the Central Government or the Tribunal or the Appellate Tribunal in writing;
• The Central Government or the Tribunal or the Appellate Tribunal shall fix a date of hearing within 14 days from the date of receipt of report;
• If the Central Government or the Tribunal or the Appellate Tribunal is satisfied that the parties have settled their dispute, it shall pass an order in accordance with terms thereof;
• If the settlement disposes of only certain issues arises in the proceeding, on the basis of which any order is passed, the Central Government or the Tribunal or the Appellate Tribunal shall proceed further to decide the remaining issues.

Expenses

The Central Government or the Tribunal or the Appellate Tribunal at the time of referring the matter to mediation or conciliation, may fix the fee of the mediator or conciliator as far as possible a consolidated sum rather for each session or meeting.  The expenses shall be borne equally by the various contesting parties or otherwise directed by the Central Government or the Tribunal or the Appellate Tribunal.  Each part shall bear the costs for production of witnesses on his side including experts or for production of documents.  The mediator or conciliator may direct the parties to deposit equal share of the probable costs of the mediation or conciliation including the fees to be paid to the mediator or conciliator before the commencement of the proceedings.  If any party or parties do not pay the amount the Central Government or Tribunal or Appellate Tribunal may issue appropriate directions to the concerned parties.   The mediation or conciliation shall commence only if the deposit is made or the proceedings will be terminated.