NCLAT Upholds Mediated Family Settlement, dismisses Plea citing Duress and Incomplete Terms [Read Order]

The Principal Bench of the National Company Law Appellate Tribunal (NCLAT) in New Delhi dismissed which challenged the NCLT order upholding a mediated family settlement. The Tribunal viewed that the finality of a mediated settlement must be respected, and objections based on subsequent events or incomplete annexures cannot be allowed to defeat a bona fide agreement.

The two appeals were filed by Sonali Prashant Shinde and Accurate Engineering Company Pvt. Ltd. which arose from a long-pending company petition (CP No. 56/2014) under the Companies Act, 1956, concerning the affairs of Accurate Engineering Company Pvt. Ltd. The NCLT had referred the matter to mediation, which resulted in the parties signing 'Consent Terms' on 07.01.2023 to settle the dispute.

Aggrieved by the settlement, the Appellants filed applications before the NCLT to set aside the consent terms. The NCLT, Mumbai, rejected these applications and disposed of the main petition by its order dated 03.10.2023, prompting the current appeals before the NCLAT.

Counsel for the Appellants argued that the consent was not free and was obtained under duress and undue influence. They contended that the settlement was incomplete and not binding because crucial annexures listing plant and machinery were not prepared or signed on the date of signing the main terms. They relied on the mediator's own emails and reports, which they claimed indicated the terms were merely a 'draft'.

The Respondents argued that the settlement was a comprehensive agreement between family members and that the annexures were a minor technical detail that was subsequently finalized and signed by all parties, as evidenced by the mediator's final report.

The NCLAT bench, comprising Justice Yogesh Khanna (Member Judicial) and Mr. Ajai Das Mehrotra (Member Technical), analyzed the allegations under the Indian Contract Act, 1872. It found the allegations of coercion, undue influence, and duress to be 'vague conjectures' without any substantive proof. The bench noted that the parties were educated family members who stood on an equal footing and were bound by their signed agreement.

The Tribunal relied on the mediator's final report, which clarified that the main terms were final and a subsequent meeting was held only to formalize the annexures, which were then signed. It was also noted that the Appellant, Ms. Shinde, had already received the full settlement amount. The Tribunal further held that there was no breach of the Mediation Rules, 2016, and that the procedural timelines were directory.

It was observed that a settlement agreement, signed by parties of full age and sound mind, cannot be set aside on vague and unsubstantiated allegations of duress, coercion, and undue influence. The NCLAT found no merit in the appeals and dismissed them, upholding the NCLT's order and the finality of the mediated settlement.

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