When it was observed that corporates preferred alternative methods to dispute resolution, there has been a new addition to the Companies Act of 2013 namely, mediation and conciliation. For the purpose of conciliation and mediation, individual states have their own specific rules. On a similar note, the Companies Act makes provisions for the parties involved in dispute to opt for mediation and conciliation while providing guidelines for the same. In view of this, the Companies (Mediation and Conciliation) rules were published in September, 2016.
Whether the disputes are before a government administrator such as the Regional Director or the Registrar of Companies or even tribunals regarding company laws. This process of mediation can be beneficial to the shareholders as well as the creditors of the company. However, there are certain types of disputes that cannot be adjudicated are those that require a strictly judicial intervention. Cases that are linked to fraud or have to do with criminal proceedings or those that have public interest. The government has retroactively started the process of starting the due action in constituting the framework for such a body. They have invited experienced professionals in different aspects of a business to be a part of the body.
However, what becomes significant in these cases is the fact that there are marked differences in the process and the general overall process of mediation and conciliation of the companies Act and mediation and conciliation in general.
- The very process of mediation as defined in its original framework institutes and encourages confidentiality as well as power to the disputants. However, when it comes to mediation with regards to the Companies Act, not only does the mediator suggest to the next arbitrator what action can possibly be resorted to, but also effectively prods them to possibly tread the same path.
- Mediations that are attached to the court in normal cases are a low cost affair. However, in the case of the mediation in these cases attract provisions where both parties have to pay the mediator fees as well as bear administrative costs pertaining to the case.
- The parties are permitted to have parallel judicial proceedings provided their rights may get affected during the mediation process. The law permits them to have a parallel court proceeding on the same subject matter. However, the rules laid down are not specific with regards to the particular circumstances when such parallel proceedings may be valid. This creates a sense of confusion with regards to the law.
In spite of the fact that the Act seems to have altered the very course or essence of the concept of mediation to a fair degree, specially when it is seen to hamper the confidentiality aspect. Authorities that govern the mediation should not make it compulsory for companies to mediate, although it is statutorily recognized. The act of being compulsive will necessarily dilute the confidence in the process of mediation in the long run.