2026 (1) TMI 22 - AT - Companies Law

Shareholder dispute over share transfer/oppression petition (ss.59, 241-242) sent to court-appointed mediation after mediator deadlock.

Dispute arose in company appeals challenging rejection of a petition under Companies Act, 2013 ss. 59, 241-242 read with s. 244, where prior liberty to ... Rejection of petition which was preferred by invoking the provisions contained u/s 59, Section 241, to be read with Section 242, Section 244 of the Companies Act, 2013 - reference of appeal to mediation - HELD THAT:- It was left open for the parties to select a Mediator and to initiate the mediation process. It was also left open to the parties to resort to legal remedies available under law, if the need so arises, as against the decision of the Mediator. When inquired about the progress of mediation as ordered above, the learned counsels for the parties have stated that, though the earlier Company Appeal (AT) (CH) No.26/2025 was disposed of, leaving it open for the parties to appoint the Mediator, the same is yet to be done and the mediator is yet to be appointed owing to a disagreement between the parties with regards to the selection of Mediator, who would be taking up the matter to be decided amongst the parties. Even today the same stalemate prevails and hence the parties agreed that, if this Appellate Tribunal appoints a retired Hon’ble Judge of a High Court as a Mediator, it would be acceptable by them, and that they would be effectively and willingly participating in the proceedings before the Mediator, as ordered by this Appellate Tribunal. Based upon the willingness extended by his Lordship, his Lordship is requested to act as a Mediator between the parties to these 3 company appeals, so as to resolve the dispute between them by making an effort for mediation/settlement - the Hon’ble Mediator would be paid with a remuneration of Rs. 1,00,000/- per sitting, which would be borne equally by both the parties to the company appeal (i.e., 50% each) - The Hon’ble Mediator, is requested to complete the mediation proceedings as far as possible, within maximum of 10 sittings. Appeal disposed off. 1. ISSUES PRESENTED AND CONSIDERED 1. Whether the disputes in the two appeals should be referred to mediation on the parties' unanimous request, and the appeals disposed of on that basis. 2. Whether, due to the parties' inability to agree on a mediator, the Tribunal should appoint a mediator and fix binding modalities for the mediation, including remuneration, sharing of costs and expenses, venue, governing procedure, timelines/sittings, and appearance directions. 3. Whether and to what extent the parties' rights to pursue judicial remedies should be preserved notwithstanding any outcome of the mediation. 2. ISSUE-WISE DETAILED ANALYSIS Issue 1: Reference to mediation and disposal of the appeals Legal framework: The Tribunal expressly directed that the mediation procedure would be in accordance with Section 424 of the Companies Act, 2013 read with Section 89 of the Code of Civil Procedure and the Companies (Mediation and Conciliation) Rules, 2016. Interpretation and reasoning: The Court recorded a unanimous statement by counsel that the parties were open to resolve the disputes through mediation. It also took note that in a related appeal the parties had been left to appoint a mediator, but mediation had not commenced due to disagreement on the selection of mediator. Considering the persisting stalemate, the Court accepted the parties' suggestion that a mediator be appointed by the Tribunal to enable mediation to proceed. Conclusions: The Court referred the disputes in both appeals to mediation and disposed of the appeals subject to the mediation terms and conditions set out in the order. Issue 2: Appointment of mediator and fixation of mediation modalities (fees, cost-sharing, venue, sittings, directions) Legal framework: The Court applied the mediation framework it expressly identified (Section 424 of the Companies Act, 2013 read with Section 89 CPC and the Companies (Mediation and Conciliation) Rules, 2016) as governing the agreed mediation process. Interpretation and reasoning: The Court found that prior liberty to the parties to choose a mediator had not resulted in appointment because of disagreement, and that the same stalemate continued. To ensure an effective mediation/settlement process, the Court appointed a mediator (a retired High Court judge) and structured the process by prescribing remuneration, equal sharing of mediator's fee and day-to-day mediation expenses, and permitting the mediator to choose the place of sittings (limited to locations indicated in the order) based on convenience. The Court also sought to confine and expedite the process by requesting completion of mediation, as far as possible, within a maximum number of sittings and by directing the parties to approach the mediator on a specified date and time. Conclusions: The Court (i) appointed a mediator for the disputes covered in the two appeals (and also for the related appeal), (ii) fixed the mediator's remuneration per sitting, (iii) directed that remuneration and incidental mediation expenses be borne equally by both sides (50% each), (iv) left the venue to the mediator's convenience within the stated options, (v) directed that the mediation be conducted under the stated statutory/rules framework, (vi) requested completion within a capped number of sittings, and (vii) issued directions to the parties to appear/approach the mediator as scheduled. The Court further directed the Registry to intimate the mediator and parties by email and to supply the appeal records to the mediator within one week. Issue 3: Preservation of parties' legal remedies notwithstanding mediation outcome Interpretation and reasoning: While disposing of the appeals on mediation terms, the Court ensured that the referral would not foreclose legal recourse. It expressly provided that any decision of the mediator would be 'without prejudice' to the parties' rights and that either party would retain the right to judicial remedy under law against the mediator's decision. Conclusions: The Court conclusively preserved the parties' right to pursue judicial remedies available in law irrespective of the mediator's decision, and declared that the mediator's decision would be without prejudice to such rights.