NCLT Ahmedabad Rejects Mediation Plea In Lendingkart Dispute, Says Parties' Consent Is Essential

The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 12 October dismissed an application by minority shareholders of Lendingkart Technologies Pvt. Ltd. seeking mediation in an ongoing oppression and mismanagement dispute involving majority shareholder Fullerton Financial Pvt. Ltd.

A Bench comprising Judicial Member Shammi Khan and Technical Member Sanjeev Sharma held that a compulsory reference to mediation would serve no useful purpose when the respondents expressly opposed the process and repeated settlement efforts had failed. It observed:

“However, in the facts of the case before us, there is express and strong opposition of the Respondents to the reference for mediation and the unsuccessful settlement efforts already undertaken, a compulsory reference would not serve a useful purpose in the present matter.”

The dispute arose from a petition filed by minority shareholders led by Lendingkart founder Harshvardhan Lunia under Sections 241 and 242 of the Companies Act, 2013, alleging oppression and mismanagement by Fullerton Financial and its nominee directors.

During the pendency of the petition, the applicants sought mediation under Section 442 to explore an amicable settlement. They relied on the Tribunal's record of the parties' willingness to settle on 18 June 2026 and subsequent settlement proposals addressed to Lendingkart Technologies and Fullerton Financial.

The applicants argued that Section 442(1), which states that the Tribunal “shall refer” a matter to mediation, allows any party to seek mediation at any stage of the proceedings. They submitted that disputes concerning majority-minority shareholder relations, management, control and company value were particularly suited to mediation. They also expressed their willingness to participate in good faith without prejudice to their claims and contentions in the main petition.

Lendingkart Technologies and Fullerton Financial opposed the application, arguing that mediation requires consent and cannot be imposed on unwilling parties. They pointed to their rejection of settlement proposals on 7 July 2026 and 7 August 2026, and submitted that another reference would only delay adjudication of the main petition. They also contended that Section 442(2) did not compel the Tribunal to refer a matter to mediation at the instance of one party.

Countering, the applicants stated that direct settlement proposals differed from a structured mediation process facilitated by an independent mediator. They argued that the failure of earlier settlement efforts did not rule out mediation and that the statute made the mechanism available during the pendency of the petition.

The Tribunal examined Section 442, Rule 6(3) and relevant judicial authorities, including the Supreme Court's decision in Bachahan Devi v. Nagar Nigam, Gorakhpur, which clarified that the word “shall” does not invariably indicate a mandatory requirement and must be interpreted in context.

It noted that referring parties to mediation and reaching a settlement through mediation were distinct stages. It observed that mediation might not result in a settlement because the outcome ultimately depends on the parties' consent. It said:

“We take cognisance of the use of expression that include word “shall”. We are also conscious of the scheme of mediation that a reference to a mediation and mediation leading to a settlement are different stages of the process. A mediation may or may not lead to an ultimate settlement which depends on consent of parties.”

The Bench found that both respondents had expressly rejected the settlement proposals and opposed mediation. Given the failed settlement efforts and continued opposition, it concluded that compelling the parties to mediation would serve no useful purpose.

It clarified that its observations would not affect the independent adjudication of the oppression and mismanagement allegations in the main petition.

Accordingly, the NCLT dismissed the application seeking mediation.