Negotiation, Conciliation and Arbitration Aspects: Role of Company Secretary in the said process
Kavita Ms.Ms. Kavita Jha, Jha, Principal Associate,Vaish Vaish Associates Advocate, Associates Advocates Advocates https://www.nclt.in/
Mediation and Conciliation and Companies Act, 2013
COMPANIES ACT, 2013: Section 442 • The Central Gov. shall maintain a panel of experts to be called as “Mediation and Conciliation Panel” for mediation between parties during the pendency of any proceedings before the Central Govt. or the Tribunal or the Appellate Tribunal under the new law. • The Panel shall dispose of the matter referred to it within a period of 3 months from the date of reference.
I. ALTERNATIVE DISPUTE RESOLUTION
Introduction ADR refers to the other ways that the parties can use to settle civil disputes with the help of an independent third party and without the need for a formal court hearing. The main types of ADR’s are: a. Arbitration b. Negotiations b. Mediation c. Conciliation
Salem Bar Association v. Union of India (AIR 2005 SC 3353) • If the Court for one reason or the other cannot itself effect a compromise, the only option it would have is to refer the parties to conciliation etc. • In the historic judgement in Salem Bar Association v. Union of India, the Supreme Court has directed the constitution of a committee to frame draft rules for mediation under S. 89(2)(d) of the CPC. Consequently, the Committee presided over by Mr Justice M. Jagannadha Rao, Chairman of the Law Commission of India has prepared a comprehensive code for the regulation of ADR process initiated under S 89 of CPC. which consists of two parts---Part I: ADR Rules 2003 consisting of “the procedure to be followed by the parties and the Court in the matter of choosing the particular method of ADR” and Part II: Mediation Rules, 2003 consisting of “draft rules of mediation under
NEGOTIATION • ‘Negotiations’ occur when two parties set forth the type of remedy each desires, and try to reach some sort of an agreement that satisfies everyone involved. In the best-case scenario, negotiations are done between the parties and both come to a happy agreement. • Once agreement has been reached, the parties will create a written statement to reflect the terms of the negotiated assets.
CONCILIATION • ‘ Conciliation’ is limited to encouraging the parties to discuss their differences and to help them develop their own proposed solutions. • It is voluntary, flexible, confidential and interest based process. the parties seek to reach an amicable dispute settlement with the assistance of the conciliator, who acts as a neutral third party.
CONCILIATION • Section related to conciliation: i. Commencement of conciliation proceeding u/s 62 of the Act. ii. After proceeding’s S.71 cooperation of parties with conciliator. iii. S.76 termination of conciliation proceeding.
• What cannot be referred to conciliation:
i. Matters of Criminal nature ii. Illegal transactions iii. Matrimonial matters like divorce suit etc.
• What can be referred to conciliation?
i. Matters of Civil Nature ii. Breach of Contract iii. Dispute of Movable or Immovable Property
Mediation • The term “mediation” broadly refers to any instance in which a third party helps others reach agreement. more specifically, mediation has a structure, timetable and dynamics that “ordinary” negotiation lacks. • The process is private and confidential, possibly enforced by law. participation is typically voluntary. the mediator acts as a neutral third party and facilitates rather than directs the process.
TYPES OF DISPUTE SUITABLE FOR MEDIATION Mediation is suitable for resolving a wide range of disputes including: • • • • • •
Business and Commercial Partnership Family Workplace Personal injury Industrial and Construction
COMPANIES ACT, 2013: Need for Mediation and Conciliation • Mediation is assisted negotiation. It is a flexible process conducted confidentially in which a neutral party i.e. the mediator, manages the interaction between disputing parties to help them come to a negotiated settlement of the dispute. The disputants and not the mediator have ultimate control over the decision to settle and terms of resolution. The final terms of settlement are recorded in the form of a binding agreement. • The process is time bound and cost effective. • Confidentiality of the entire process and all concessions made by parties during negotiation is maintained. Since the parties mutually agree to the settlement terms, probability of litigation over settlement is also low.
ROLE OF MEDIATOR/ CONCILIATOR UNDER SECTION 442 • The mediator/conciliator shall attempt to facilitate the following: • voluntary resolution of the dispute(s) by the parties, • 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), emphasizing that it is the responsibility of the parties to take decision which affect them. • He shall not impose any terms of settlement on the parties. • However, if both the parties consent, he may impose such terms and conditions on the parties for early settlement of
“An ounce of mediation is worth a pound of arbitration and a ton of litigation!” — Joseph Grynbaum
II. ARBITRATION
Introduction Arbitration: As per Halsbury ‘s Laws of England • It means reference of a dispute between not less than two parties, for determination, after hearing both sides in a judicial manner, by a person or persons other than a court of competent jurisdiction. Object of Arbitration • Settlement of dispute in an expeditious, convenient, inexpensive and private manner to prevent it fro, becoming a subject of future litigation.
Types of Arbitration Practice - Institutional Arbitration and Ad Hoc Arbitration AD HOC ARBITRATION
INSTITUTIONAL ARBITRATION
A. The procedures have to be agreed upon by the parties and the arbitrator. This requires cooperation between the parties and involves a lot of time
A. In institutional arbitration, the procedural rules are already established by the institution. The fees are also fixed and regulated under rules of the institution.
B. Infrastructure facilities for conducting arbitration pose a problem and parties are often compelled to resort to hiring facilities of expensive hotels, which increase the cost of arbitration. Other problems include getting trained staff and library facilities for ready reference.
B. In contrast, the institution will have ready facilities to conduct arbitration, trained secretarial/administrative staff, as well as library facilities.
C. No such panel per se is available here.
C. The arbitral institutions maintain a panel of arbitrators along with their profile. The parties can choose the arbitrators from the panel. Such arbitral institutions also provide for specialized arbitrators.
Inspite of the numerous advantages of institutional arbitration over ad hoc arbitration, there is currently an overwhelming tendency in India to resort to ad hoc arbitration mechanisms.
Evolution of Arbitration Act • The Pre-1996 Position (1940 Act): This Act was largely premised on mistrust of the arbitral process and afforded multiple opportunities to litigants to approach the court for intervention. Coupled with a sluggish judicial system, this led to delays rendering arbitrations inefficient and unattractive. • The 1996 Act: The 1996 Arbitration Act based on the UNCITRAL on International Commercial Arbitration and the Arbitration Rules of the United Nations Commission on International Trade Law 1976 was enacted. • The Statement of Objects and Reasons to the Act said that the old Act had ‘become outdated’ and there was need to have an Act ‘more responsive to contemporary requirements’. Amongst the main objectives of the 1996 Act were ‘to minimize the supervisory role of courts in the arbitral process’ and ‘to provide
Arbitration and Conciliation Act, 1996
• Part I – Domestic Arbitration • Part II – Enforcement of foreign awards • Part III – Conciliation Procedures • Part IV – Supplementary Provisions
In spite of Arbitration being an effective tool of dispute resolution, there were various shortcomings which were required to be resolved.
Issues faced under 1996 Act • High costs and delays: Thus, making it no better than either the earlier regime which it was intended to replace. • After the award, a challenge under section 34 makes the award in executable and such petitions remain pending for several years. • Proceedings in arbitrations are becoming a replica of court proceedings. • Appointment and independence of Arbitrators.
Arbitration and Conciliation (Amendment) Act, 2015
• In an attempt to make arbitration a preferred mode of settlement of commercial disputes and making India a hub of international commercial arbitration, the President of India on 23rd October 2015 promulgated an Ordinance ("Arbitration and Conciliation (Amendment) Ordinance, 2015) amending the Arbitration and Conciliation Act, 1996. • Prior to the amendment of the Indian Arbitration and Conciliation Act 1996 (“the Act”), India’s journey towards becoming an international commercial hub that could rival Singapore and London was hampered by a largely ineffective Act and an arbitration regime that was afflicted with various problems including those of high costs and delays. • To address these issues the Arbitration and Conciliation Act, 2015 was introduced.
Amendments made in 2015 The Law Commission of India had brought out Report No. 246 in August 2014, recommending various amendments to the Arbitration & Conciliation Act, 1996, which have been incorporated vide Arbitration and Conciliation (Amendment) Act, 2015
Issues resolved by Arbitration and Conciliation (Amendment) Act, 2015
1. Appointment of Arbitratoradministrative power • Section 11 of Arbitration and Conciliation Act, 1996 provided for appointment of Arbitrator by Chief Justice or any person or institution designated by him. Now, the powers are with High Court or Supreme Court. Thus, now, any bench of High Court/ Supreme Court can appoint Arbitrator. • Section 11(6A) has been inserted to provide that the Supreme Court or High Court, while considering application for appointment of arbitrator, shall examine only existence of arbitration agreement (and not merits of the case). • Section 11(6B) has been inserted to clarify that appointment of Arbitrator by any person or institution nominated by Supreme Court or High Court will not be considered as delegation of judicial powers. • Thus, appointment of Arbitrator is only an administrative matter.
2. Independence of Arbitrator • Neutrality of arbitrators, viz. their independence and impartiality, is critical to the entire process. • Test for neutrality is set out in section 12(3) which provides – • “An arbitrator may be challenged only if (a) circumstances exist that give rise to justifiable doubts as to his independence or impartiality…” • The balance between procedural fairness and binding nature of these contracts, appears to have been tilted in favour. • Large scale amendments were suggested to address this fundamental issue of neutrality of arbitrators particularly to sections 11, 12 and 14 of the Act. • Further, the Commission had proposed the requirement of
Independence of Arbitrator • Section 12(1) of Arbitration and Conciliation Act, 1996 expected Arbitrator to make disclosure of his possible connection or interest • However, the section did not specify any criteria. • Now, fifth schedule has been inserted specifying grounds to guide on which independence and impartiality of Arbitrator can be doubted. • Section 12(5) also inserted by Amendment Act, 2015, which provides that if arbitrator has interest ( direct or indirect) as specified in schedule seven of the Arbitration and Conciliation Act, 1996, he cannot be appointed as Arbitrator, unless both parties agree in writing, after dispute has arisen. • Thus, a mere clause in Arbitration Agreement about appointment of arbitrator of choice of one of the parties is not sufficient.
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3. FEES OF ARBITRATOR S Unilateral and disproportionate fixation of fees by several arbitrators.
• The subject of fees of arbitrators has been the subject of the lament of the Supreme Court in Union of India v. Singh Builders Syndicate, (2009) 4 SCC 523. • Commission had recommended a model schedule of fees and has empowered the High Court to frame appropriate rules for fixation of fees for arbitrators and for which purpose it may take the said model schedule of fees into account.
• The model fees payable to Arbitrator have been specified in Fourth Schedule inserted to Arbitration and Conciliation Act, 1996 vide 2015 amendment. The fee varies between Rs. 45,000 to Rs. 30 lakhs depending on the sums in dispute. • Section 11(14) inserted by Amendment Act, 2015: For the purpose of determination of the fees of arbitral Tribunal, the High Court may frame such rules as may be necessary, after taking into consideration the rates specified in the Fourth Schedule.
4. CONDUCT OF ARBITRAL PROCEEDINGS • Commission had proposed addition of the second proviso to section 24 (1) to the Act, which is intended to discourage the practice of frequent and baseless adjournments, and to ensure continuous sittings of the arbitral tribunal for the purposes of recording evidence and for argument. • Proviso to section 24(1) of Arbitration and Conciliation Act, 1996 inserted by Amendment act, 2015. • Hearing of Arbitrator Tribunal should be on day to day basis without adjournment. • If any party seeks adjournment without sufficient cause, costs including exemplary costs can be imposed on him - proviso to section 24(1) of Arbitration and Conciliation Act,
5. Time Limit for making awards • Section 29A inserted by Amendment Act, 2015. • The Arbitral tribunal shall make Arbitration Award within 12 months from date of reference. • The period can be extended by the parties upto six months by mutual consent. • Fees payable to Tribunal can be reduced upto 5% for each month of delay. • If award is not made within that period, the mandate of arbitrator terminates. • However, court can further extend the mandate on suitable terms and conditions. • In fact, now Arbitrator, while giving declaration under section 12(1) of the Act has to state whether he has sufficient time to complete assignment within 12
6. Fast track procedure for arbitral award • If both parties agree in writing, the arbitral tribunal can follow fast track procedure. • Decision will be on basis of written pleadings, documents and submissions. • Oral hearing will be only to clarify certain points. Technical formalities for oral hearing may be dispensed with by arbitral tribunal. • Award shall be made within six months – section 29B of Arbitration and Conciliation Act, 1996 inserted by Amendment Act, 2015.
7. JUDICIARY AND ARBITRATION • It is thought in some quarters that judicial intervention is anathema to arbitration, and this view is not alien to a section of the arbitration community even in India. The Commission however, does not subscribe to this view. The Commission recognizes that the judicial machinery provides essential support for the arbitral process. The paradox of arbitration, as noted by a leading academic on the subject, is that it seeks the co-operation of the very public authorities from which it wants to free itself. • The Commission has strived to adopt a middle path to find an appropriate balance between judicial intervention and judicial restraint.
Judicial intervention in arbitration proceedings • Judicial intervention in arbitration proceedings adds significantly to the delays in the arbitration process and ultimately negates the benefits of arbitration • Dedicated benches for arbitration related cases: eg. Delhi High Court has a separate bench. • Amendment in section 11: Delegate the power of appointment (being a non-judicial act) to specialized, external persons or institutions. • Amendment to section 11 (7) made providing that decisions of the High Court/ Supreme Court (regarding existence/nullity of the arbitration agreement) are final where an arbitrator has been appointed, and as such are non-appealable.
Judicial intervention in arbitration proceedings (contd..) • section 11 (13) was inserted, which requires the Court to make an endeavor to dispose of the matter within sixty days from the service of notice on the opposite party. • Sections 34 (6) inserted which requires that an application under those sections shall be disposed off expeditiously and in any event within a period of one year from the date of service of notice • New sub-clause (2A) inserted to section 23 of the Act in order to ensure that counter claims and set off can be adjudicated upon by an arbitrator without seeking a separate/new reference by the respondent, provided that the same falls within the scope of the arbitration agreement
9. SCOPE AND NATURE OF PREARBITRAL JUDICIAL INTERVENTION • The Act recognizes situations where the intervention of the Court is envisaged at the pre-arbitral stage, i.e. prior to the constitution of the arbitral tribunal, which includes sections 8, 9, 11 in the case of Part I arbitrations and section 45 in the case of Part II arbitrations. • Supreme Court in Shin Etsu Chemicals Co. Ltd. v Aksh Optifibre, (2005) 7 SCC 234, (in the context of section 45 of the Act) ruled in favour of looking at the issues/controversy only prima facie. • Sections 8 and 11 has been amended restricting the scope of the judicial intervention only to situations where the Court/Judicial Authority finds that prima facie no valid arbitration agreement exists.
10. SETTING ASIDE OF DOMESTIC AWARDS AND RECOGNITION/ENFORCEMENT OF FOREIGN AWARDS
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Section 34 of the Act deals with setting aside a domestic award and a domestic award resulting from an international commercial arbitration whereas section 48 deals with conditions for enforcement of foreign awards. The Act, as it is presently drafted, treats all three types of awards as same.
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The legitimacy of judicial intervention in the case of a purely domestic award is far more than in case of other awards.
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Therefore, Section 34 (2A) was added, to deal with purely domestic awards, which may also be set aside by the Court if the Court finds that such award is vitiated by “patent illegality appearing on the face of the award.” In order to provide a balance and to avoid excessive intervention, it is clarified in the proposed proviso to the proposed section 34 (2A) that such “an award shall not be set aside merely on the ground of an erroneous application of the law or by re-appreciating evidence.”
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Public Policy- Section 34
• Object of the Act: Ensure speedy disposal with minimum court intervention. • Section 34(2)(b)(ii) provides that court can set aside an arbitral award if the court finds that ‘’the arbitral award is in conflict with the public policy of India’’. Similarly, section 48(2)(b) provides same in case of foreign arbitral awards. • Challenge: The term ‘’public policy’’ is not defined and under UNCITRAL Model (from where sec. 34 is derived), the courts were supposed to act as Courts of Review and not Courts of Appeal. • However, over the period a very wide interpretation has been given to the above term.
Public Policy- Judicial Interpretation • Supreme Court in Renusagar Power Co. Ltd. vs. General Electric Co. [(1994 SCC supp. (1) 644] gave narrow interpretation to term ‘’public policy’’. • Subsequently, SC in ONGC Ltd. vs. Saw Pipes Ltd. (2003 5 SCC 705) expanded its definition to include cases of ‘’patent illegality’’. • Criticism: Eminent jurist/ Advocate Fali Nariman adversely commented on above judgment. • International view: Enforcement of foreign awards is regulated by New York Convention (article V(2)(b) and same was incorporated in section 48 of the Act and so Act should be interpreted in consonance with the objectives of NYC that is that the term ‘’public policy’’ must be construed narrowly.
Public Policy- Judicial Interpretation (contd..) • This international view was reflected in Delhi HC decision in Glencore Grain Rotterdam BV vs. Shivnath Rai Harnarain (India) Co. [2008] 94 ARB LR 497 (Delhi)]. • However, SC in Phulchand exports Ltd. v OOO Patriot (2011 11 SCALE 475) followed the ‘Saw Pipes’’ view of expanded interpretation. • Thereafter, SC overruled above decision in Sgri Lal Mahal Ltd. vs. Progetto Grano Spa (2014) 2 SCC 433 following the narrow interpretation in ‘’Renusagar’’ decision. • Accordingly, 246th report provided for the same narrow approach by inserting an explanation to section 23((2)(b)(ii) and inserting new provision section 34(2A).
Public Policy- The Problem • SC in ONGC Ltd. vs. Western Geco International Ltd. (2014) 9 SCC 263 in para 39 construed the term ‘’fundamental policy of India’’ very widely incorporating the Wednesbury principle of reasonableness. • Same was followed in Associates Builder vs. DDA (2014) 4 ARBLR 307 SC. • Such power of review of award on merits is against the international practice and the Statement of object of 1996 Act which says ‘’minimization of judicial intervention’’. • This would lead to disastrous effect as: i. Erosion of faith in arbitration proceedings ii.Reduction of popularity of India as arbitration destination iii.Increase in judicial backlog
Public Policy: Solution- 2015 Amendment • Practically, the Court had become appellate authority over the arbitral tribunal. • This was not the intention of Arbitration and Conciliation act, 1996 at all. • Hence, explanations have been added by Amendment act, 2015 to section 34(2)(b) of Arbitration and Conciliation act, 1996 restricting the scope of ‘public policy’. • Thus, now, Courts cannot go into merits of the arbitral
Public Policy: Solution- 2015 Amendment •
34(2)(b)(ii) : The arbitral award is in conflict with public policy of India.
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Explanation 1: For the avoidance of any doubt, it is clarified that an award is in conflict with the public policy of India only if: a.making of award was induced or affected by fraud or corruption or was in violation of section 75 or 81; b.It is in contravention with the fundamental policy of Indian Law; or c.It is in conflict with most basic notions of morality or justice.
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Explanation 2: For avoidance of doubt, the test as to whether there is a contravention with the fundamental policy of Indian law shall not entail a review on merits of dispute.
Public Policy: Solution- 2015 Amendment • Further, following sub-clause was inserted: • Section 34(2A): An arbitral award arising out of arbitrations other than international commercial arbitrations, may also be set aside by the Court if the Court finds that the award is vitiated by patent illegality appearing on the face of the award. • Provided that an award shall not be set aside merely on the ground of an erroneous application of law or re-appreciation of evidence.
11. Enforcement of arbitral awards • Under Section 1996 Act, pendency of a section 34 petition renders an arbitral award unenforceable i.e. automatic stay of enforcement of the award upon admission of challenge. • The Supreme Court, National Aluminum Co. Ltd. v. Pressteel & Fabrications, (2004) 1 SCC 540 had criticized this. • In order to rectify this mischief, certain amendments have been suggested by the Commission to section 36 of the Act, which provide that the award will not become unenforceable merely upon the making of an application under section 34.
Enforcement of arbitral awards • Section 36 of arbitration and Conciliation act, 1996, as amended by the Amendment Act, 2015 specifically provides that the award can be enforced even if one of the parties has approached Court for setting aside the arbitral award, unless specific stay has been granted by the competent court. • Thus, mere application to Court for setting aside the arbitral award would not result in stay for enforcement of the arbitral award. This is a very good provision to avoid delay in enforcement of arbitral award.
12. JUDICIAL INTERVENTIONS IN FOREIGN SEATED ARBITRATIONS • Section 2(2) of the Arbitration and Conciliation Act, 1996 (the “Act”), contained in Part I of the Act, states that “This Part shall apply where the place of arbitration is in India.” • Article 1(2) of the UNCITRAL Model Law provides: “The provisions of this Law, except articles 8, 9, 35 and 36, apply only if the place of arbitration is in the territory of this State • Supreme Court in Bhatia International vs. Interbulk Trading SA, (2002) 4 SCC 105, and before the five-judge Bench in Bharat Aluminum and Co. vs. Kaiser Aluminium and Co., (2012) 9 SCC 552 (hereinafter called “BALCO”) was whether the exclusion of the word “only” from the Indian statute gave rise to the implication that Part I of the Act would apply even in some situations where the arbitration was conducted outside India. • The Supreme Court in BALCO decided that Parts I and II of the Act are
JUDICIAL INTERVENTIONS IN FOREIGN SEATED ARBITRATIONS (contd.) • The above issues have been addressed by way of adding a proviso to sections 2(2) of the Act: “Provided that subject to an agreement to the contrary, the provisions of sections 9, 27, and 37(3)(1)(a) shall also apply to international commercial arbitration, even if the place of arbitration is outside India, and an arbitral award made or to be made in such place is enforceable and recognize under the provisions of Part II of this Act.”
13. POWERS OF TRIBUNAL TO ORDER INTERIM MEASURES • Under section 17, the arbitral tribunal has the power to order interim measures of protection, unless the parties have excluded such power by agreement. • However, its efficacy is seriously compromised given the lack of any suitable statutory mechanism for the enforcement of such interim orders of the arbitral tribunal. • Delhi High Court attempted to find a suitable legislative basis for enforcing the orders of the arbitral tribunal under section 17 in the case of Sri Krishan v. Anand, (2009) 3 Arb LR 447 (Del). • However, above is not suffice and therefore the Commission has recommended amendments to section 17 of the Act which would give teeth to the orders of the Arbitral Tribunal and the same would be statutorily enforceable in the same manner as the Orders of a Court.
14. Other Amendments Arbitration agreement through emails • Section 7 has been amended to make specific provision that arbitration agreement can be made through electronic communications. Interim measures by Court • Section 9 has been amended to provide that if Court grants interim relief, Arbitration should commence within 90 days. • Further, once arbitration tribunal has been constituted, the Court shall grant interim relief only if the Arbitral Tribunal itself cannot grant relief under section 17 of Arbitration and Conciliation Act, 1996. • Section 17 of Arbitration and Conciliation Act, 1996 as amended by Amendment Act, 2015 gives wide powers to Arbitral tribunal to grant interim reliefs. • Thus, normally, it may not be necessary to approach Court for interim reliefs and such orders are enforceable under CPC.
Other Amendments Interest on amount payable under arbitration award • Interest at the rate of 2% higher than the current rate of interest prevalent on the date of award, from the date of award to the date of payment. The expression “current rate of interest” shall have the same meaning as assigned to it under section 2(b) of the Interest Act, 1978. The earlier provision was for payment of interest @18%. Cost of Arbitration • Section 31A of Arbitration and Conciliation Act, 1996 as inserted by Amendment Act, 2015 contains detailed guidelines on determination and award of costs to the successful parties. • As per provisions of section 31A(5), an agreement to pay whole or part of costs of arbitration in any even shall be valid only if such agreement is made after dispute has arisen. • Thus, a mere clause in Arbitration Agreement about payment of cost by one of the parties is not sufficient. • This is a very good provision. The reason is that, at the time of
Other Amendments Appeal if Court refuses to refer parties to arbitration • Section 37(1)(a) of Arbitration and Conciliation Act, 1996 as inserted by the Amendment Act, 2015 now provides that appeal can be filed before appellate Court if the Court refuses to refer parties to arbitration. • There was no parallel provision earlier. Enforcement of foreign awards and Geneva convention awards Explanation to Section 47 inserted by the Amendment Act, 2015 now provides that only High Court can be approached for enforcement of foreign award. Explanation to Section 48(2)(b) inserted by the Amendment Act, 2015 now provides that enforcement of foreign awards can be refused if it is contrary to public policy (restricted as in part I) and therefore debars the court from going into merits of the case.
III. Company Secretary & ADR
ROLE OF A COMPANY SECRETARY • The Companies Act, 2013 has considerably enhanced the role and responsibilities of company secretaries both in employment and in practice. • Company secretary is a key managerial person in a company, responsible to ensure the effective and efficient administration of the company and certifying the company’s compliance with the provision of the Act. • Section 205 has also been added in the Companies Act, 2013. According to Section 205 of the Companies Act, 2013 the Company Secretary shall discharge following functions and duties, this is the first time that the duties of the company secretary have been specified in the company law.
New Horizons for CS in Practice under The Companies Act, 2013 • Corporate Restructuring & Insolvency • Company Liquidators & Professional assistance to them [Sec.275] [Sec.291] • Appointment as an Administrator [ Sec.259] • Technical member of NCLT [Sec.409] • E- Filing • Voting through electronic means [Sec.108] • Adjudication of penalties [Sec.454] • Mediation & conciliation Panel [Sec.442]
Role Of a Company Secretary As a Mediator or Conciliator • The Central Government is to maintain a panel of experts to be called as “Mediation and Conciliation Panel” for mediation between parties during the pendency of any proceedings before the Government or the Tribunal or the Appellate Tribunal Central under the new law. • Rules in respect of Section 442 provide for qualifications for being appointed in the Mediation and Conciliation Panel and states:• Rule 28.1(g): Professionals with at least fifteen years of continuous practice as Chartered Accountant or Cost Accountant or Company Secretary can be appointed in the panel.
Role Of a Company Secretary As a Mediator or Conciliator • The Company Secretaries are authorized to advise on arbitration, negotiation and conciliation in commercial disputes between the parties. • A Company Secretary is trained to Act as arbitrator / conciliator in domestic and international commercial disputes. • Company Secretaries are also qualified to Draft arbitration / conciliation agreement/ clause.
Advantages of a Company Secretary in the Arbitration process • Company secretaries are not only corporate legal experts but due to the very nature of profession, their knowledge is far superior in respect of commercial understanding. They have an edge in the sense that they understand the underlying commercial transaction or the legal framework in a more effective manner. • Since they are exposed to various facets of law and the management, they can formulate a better strategy in arbitral proceedings while advising to the client. Thus company secretaries in practice can act as strategist and authorized representative in arbitral proceedings.
CONCLUSION Thus, CS can act as arbitrators and the society can get the benefit of their knowledge and expertise in commercial and legal matters. The Institute can also make representations to the Government through proper channels so as to encourage appointment of company secretaries as arbitrators. This is possible only after an awareness is created among the society about this new role of company secretaries. Apart from the Institute, even the company secretaries in practice can help in creating this awareness in the society. If this happens, the day is not far when even the Chief Justices of the various High Courts will appoint company secretaries as arbitrators under the powers vested in them under the Act.
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