Who moved my shareholder dispute?

Lockdowns and “Covid-19” are wiping out economies. Conflicts, be it among individuals or corporations are on a surge. The already clogged courts are getting further swamped with commercial and contractual cases. More so, the difficulty is that either the courts are closed, or entertaining only extremely urgent matters as per their discretion. We need to be wise, and pause and think how to approach a conflict situation—whether in an adversarial or non-adversarial manner?

In times like these, financial resources have to be used very sparingly by a corporate at least on disputes as there are various other priorities for companies including finding ways to cope up with the upcoming recession, avoid laying off its employees, developing new strategies for business, diversifying etc. This goes without saying that conflicts are as inevitable as taxes and death. It is advisable to manage them rather than brushing them under the carpet, delaying a resolution, or even only rushing to the courts. It is time to try mediation whole heartedly.

The companies of future are the ones with empathy. The narrative of doing business will change in future. As a consequence, it is also time that the narrative of dispute resolution is changed from standing before a bench to sitting across a table. This draws our attention to the well drafted yet unutilised Section 442 buried in the seven years old Companies Act, 2013. It is time to give the provision its due and utilise it to the benefit of both corporates and tribunals for saving relationships, time and definitely money as well as not getting stuck in backlog.

Section 442 allows the parties to mediate the conflict by applying to the National Company Law Tribunal (NCLT) or National Company Law Appellate Tribunal (NCLAT) as the case may be. It also grants power to the NCLT and NCLAT when it deems fit to suo motu refer pending matters before it to mediation. The purpose of legislations is to lay down ground rules that help simplify and demystify moot situations. In the present scenario, as the tribunals are closed and for justice to prevail, parties to a fresh dispute should mediate matters through institutional mediation centers recognized by courts or Ministry of Law and Justice. The courts can also refer presently pending matters to an institutional mediation set up having the panel of well qualified mediators as contemplated under Section 442 read along with the corresponding rules.

This also brings us to another issue—how do we mediate when we cannot meet in person or be represented through our lawyers when social distancing is recommended and lockdowns are mandatory? Mediation is a voluntary process where parties along with their lawyers with the help of the third-party neutral mediator resolve the dispute by sitting across a table and structuring a long term, feasible, and binding solution. The nature and effectiveness of mediation hardly differs whether carried out offline or online though experts argue that observing the body language of a disputant works as a catalyst for the mediator to effectively assist the parties to arrive at a solution. Then there is the legal advice that you ought to follow the straight line formula of legal notices invoking contractual clauses and pleading impossibility of performance.

If these experts cast a shadow of doubt in your minds as to whether mediation is really effective and whether it will be successful online, remember that a month ago India had continuously delayed virtual courts calling them unfeasible and that courts in India are now functioning exclusively online. Work from home was considered a taboo and is now a new normal.

Also, remind yourself that respective experts had raised similar doubts on various issues in last two to three decades including but not limited to whether liberalisation and globalisation is good for indigenous economies, use of technologies in offices may render people jobless, e-commerce is a big bubble, virtual classrooms are distracting students and Elon Musk’s Space X is merely fictional.

Time has disproved all because it is only when the going gets tough, businesses survive by pushing the envelope and taking paths that were otherwise considered not worth the risk. Human civilization has not survived by giving up on determination and attempts to experiment and reinvent something new. Similarly, let us resolve to try mediations through audio and video conferencing facility. This too has worked well globally as well as at mediation centres in India with which we are affiliated. This adversity of Covid-19 should be seen as an opportunity by the judges and lawyers to embrace mediation and more so presently via audio and video conferencing facility whole heartedly.

The settlements drafted can be encrypted and kept absolutely confidential. For the sceptics, the settlements can be filed with court for passing as consent orders. For the practical, settlement agreements can be drafted such that actually doing what is said makes commercial sense for parties. This is possible with mediation centres where industry experts are mediators along with legal luminaries and bring a commercial focus to dispute settlement.

It is also important to know that matters such as shareholders disputes, oppression and mismanagement, class actions, share transfers, share transmissions, forfeiture of shares and all other matters under Companies Act can be mediated. Only matters involving inspection by Ministry of Corporate Affairs, fraud, matters involving public interest and non-compoundable criminal offences cannot be mediated. Corporates should mediate to resolve, reinvent, realign and restore. When times are uncertain, one of the sustainability goals of a company should also be sustainable dispute resolution and let us not forget, charity begins at home.

Views are personal.

A.K Sikri is a former Judge of the Supreme Court of India, presiding International Judge of the Singapore International Commercial Court and an eminent mediator with Centre for Mediation and Conciliation (CMC), Bombay Chamber of Commerce and Industry.

Sumit Banerjee is the former MD & CEO of ACC Cement and the chief mentor at the Centre for Mediation and Conciliation (CMC), Bombay Chamber of Commerce and Industry.