Section 378ZO of Companies Act 2013 - Disputes of Producer Companies
Section 378ZO provides a statutory dispute-resolution mechanism for specified disputes connected with the formation, management or business of a Producer Company. Such disputes are to be resolved through conciliation or arbitration under the Arbitration and Conciliation Act, 1996.
What Section 378ZO covers
The section applies when a dispute relating to the formation, management or business of a Producer Company arises within the categories specified by the provision. It treats the statutory requirement as if the parties had given written consent to resolve the covered dispute by conciliation or arbitration under the Arbitration and Conciliation Act, 1996.
Persons and entities covered
The provision covers disputes among Members, former Members, persons claiming to be Members and nominees of deceased Members; disputes between such persons and the Producer Company, its Board, office-bearers or liquidator; and disputes between the Producer Company or its Board and present or former directors, office-bearers, or specified representatives of a deceased director.
Meaning of dispute for this section
The statutory explanation expressly includes debt or amount-due claims, specified claims by a surety against a principal debtor, claims by a Producer Company against a Member for failure to supply required produce, and claims by a Member where the Producer Company does not take goods supplied by the Member.
Who decides whether the dispute falls within Section 378ZO?
Under sub-section (2), if a question arises as to whether a dispute relates to the formation, management or business of the Producer Company, that question is referred to the arbitrator, whose decision on that question is stated by the section to be final.
Text of Section 378ZO - Disputes
378ZO. Disputes.
(1) Where any dispute relating to the formation, management or business of a Producer Company arises--
(a) amongst Members, former Members or persons claiming to be Members or nominees of deceased Members; or
(b) between a Member, former Member or a person claiming to be a Member, or nominee of deceased Member and the Producer Company, its Board of Directors, office-bearers, or liquidator, past or present; or
(c) between the Producer Company or its Board, and any director, office-bearer or any former director, or the nominee, heir or legal representative of any deceased director of the Producer Company,
such dispute shall be settled by conciliation or by arbitration as provided under the Arbitration and Conciliation Act, 1996 (26 of 1996) as if the parties to the dispute have consented in writing for determination of such disputes by conciliation or by arbitration and the provisions of the said Act shall apply accordingly.
Explanation.--For the purposes of this section, a dispute shall include--
(a) a claim for any debt or other amount due;
(b) a claim by surety against the principal debtor, where the Producer Company has recovered from the surety amount in respect of any debtor or other amount due to it from the principal debtor as a result of the default of the principal debtor whether such debt or amount due be admitted or not;
(c) a claim by Producer Company against a Member for failure to supply produce as required of him;
(d) a claim by a Member against the Producer Company for not taking goods supplied by him.
(2) If any question arises whether the dispute relates to formation, management or business of the Producer Company, the question shall be referred to the arbitrator, whose decision thereon shall be final.
Official legal resources: Read the Companies Act, 2013 on the Ministry of Corporate Affairs website and the Companies Act, 2013 on India Code. Section 378ZO applies the dispute-resolution framework of the Arbitration and Conciliation Act, 1996 to disputes falling within the section.
Practical effect of Section 378ZO
For a dispute falling within Section 378ZO, the statute itself supplies the basis for conciliation or arbitration. The provision should therefore be read together with the Arbitration and Conciliation Act, 1996 for the procedure, appointment and jurisdiction of the arbitral tribunal, conduct of proceedings, awards and remedies available under that Act.
Legislative note: Section 378ZO was inserted by section 52 of the Companies (Amendment) Act, 2020 with effect from 11 February 2021.