Mediation Settlement Remains Binding Despite Subsequent Coercion Allegations and Absence of Supporting Annexures
- REEDLAW
- 1 day ago
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REEDLAW Legal News Network reports: In a pivotal ruling, the National Company Law Appellate Tribunal (NCLAT), New Delhi Bench comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member), held that once mediation culminates in duly signed consent terms, subsequent objections alleging coercion or incomplete annexures cannot invalidate the settlement, as no statutory ground vitiating free consent was established; accordingly, the signed consent terms remain binding and enforceable.
While adjudicating a batch of two Company Appeals and connected Interlocutory Applications, the Tribunal observed that the parties had voluntarily executed the consent terms following extensive mediation, and no evidence was presented to establish coercion, undue influence, or duress. The Tribunal emphasised that annexures allegedly missing at the time of execution did not undermine the validity or enforceability of the settlement, which had been finalised and duly signed by all parties, and subsequently filed on record.
The Appellant had contested a petition filed in 2014 seeking relief under Sections 397, 398, 402 and 403 of the Companies Act, 1956. During the pendency of proceedings, mediation was initiated by the Adjudicating Authority by appointing a mediator, who conducted multiple sessions and prepared minutes of understanding culminating in execution of consent terms on 07.01.2023. The Appellant signed the consent terms but subsequently raised objections alleging coercion, undue influence and absence of free consent. It was argued that the mediation process was defective and that the consent terms were incomplete, particularly because annexures listing plant and machinery for two business divisions were neither attached nor finalised on the date of execution, thereby rendering the consent terms unenforceable.
The Appellant relied on various email communications and mediation reports to contend that the consent terms were not complete at the time of signing. It was submitted that the lists of assets relating to manufacturing and service businesses were part of Annexures 1 and 2 and these were integral to the implementation of the settlement. It was further argued that the mediator had acknowledged in a communication dated 14.01.2023 and in his second report dated 24.01.2023 that annexures were not signed and required further finalisation in his presence. Based on such communications, it was urged that the consent terms were only tentative and incapable of enforcement.
The Respondents opposed the contentions and submitted that the consent terms were voluntarily executed by all concerned, and execution was not denied. It was argued that all parties, being well-informed family members of full age and sound mind, acted consciously in the settlement of their inter se disputes. It was further contended that if Annexures were not attached contemporaneously, that omission did not invalidate the consent terms, since the underlying rights, transfer structure and settlement understanding were complete and binding.
The Tribunal examined allegations of coercion, undue influence and duress within the framework of Sections 10, 14-19 of the Indian Contract Act, 1872. It held that no concrete particulars were pleaded or proved to substantiate coercion within the meaning of Section 15 IPC-based coercion, nor was there material to show any dominant position being exploited to secure advantage. Assertions regarding mental pressure or emotional circumstances were held vague and insufficient. Allegations of duress were rejected for failure to demonstrate that consent would not have been given but for alleged pressure.
The Tribunal observed that the parties stood on equal footing and had executed the consent terms conclusively. It noted that objections were raised only two days after signing, and no material was shown to prove that annexures were deliberately omitted or concealed. The mediator’s communications were read to show that the requirement of signing annexures was procedural and did not alter the finality of the consent terms already executed. The Tribunal held that the settlement terms sufficiently reflected the intentions of the parties, and incomplete attachment of annexures did not render them void or non-binding.
In conclusion, the Tribunal dismissed the applications seeking to set aside consent terms. It held that mere conjecture, unsubstantiated assertions or subsequent dissatisfaction could not invalidate a concluded settlement duly signed during mediation, particularly when no statutory ground vitiating free consent was established. The appeals were consequently rejected.
Mr. Sanjay Kumar Dubey, Mr. Sushil Nimbkar, Ms. Shuchi Singh, and Mr. Ujjwal Kumar Dubey, Advocates, represented the Appellants.
Mr. Chinmoy Khaladkar, Mr. Anand Shankar Jha, Mr. Sachin Mintri, Mr. Shrenik Gandhi and Mr. Shubhank Sharma, Advocates, appeared for the Respondent.
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