The role of the National Company Law Tribunal (“NCLT“) as a specialised forum under company law has often led to questions around the exact scope of its jurisdiction. While the Companies Act, 2013 (“Companies Act“) grants the NCLT powers to deal with specific disputes, it is not a civil court, and therefore, its authority to decide issues that also involve wider civil or contractual questions has always been debated. The Supreme Court in Mrs. Shailja Krishna v. Satori Global Limited & Ors.[1] has addressed one such issue regarding the NCLT’s jurisdiction to adjudicate allegations of fraud, coercion, and manipulation while deciding petitions for oppression and mismanagement. The Court held that the NCLT’s jurisdiction is wide enough to deal with these questions where such issues are central to resolving the oppression and mismanagement dispute.
Background
The company in question, originally incorporated as Sargam Exim Private Limited (later renamed Satori Global Limited) (the “Company“), was promoted by Mrs. Shailja Krishna and her husband, Mr. Ved Krishna. Over time, Mrs. Krishna acquired an overwhelming majority of 39,500 (thirty-nine thousand five hundred) shares out of 40,000 (forty thousand), making her the near total owner of the Company.
In December 2010, two controversial events took place on the same day. Mrs. Krishna’s resignation as director was recorded, and her entire shareholding was shown to have been transferred by way of a gift deed to her mother-in-law, Mrs. Manjula Jhunjhunwala. Around this period, Mrs. Krishna’s marriage had broken down, and divorce proceedings were underway. She subsequently alleged that she had been forced to sign blank papers that were later converted into share transfer documents.
Mrs. Krishna challenged these events, filing police complaints and eventually approaching the Company Law Board (later transferred to the NCLT) with a petition for oppression and mismanagement. The NCLT accepted her case, restored her as executive director, and declared her the rightful owner of the 39,500 (thirty-nine thousand five hundred) shares. However, on appeal, the National Company Law Appellate Tribunal (“NCLAT“) overturned the decision on the ground that the NCLT lacked jurisdiction to rule on fraud and coercion. That decision was further appealed before the Supreme Court.
Legal Framework
The case arose under sections 397 and 398 of the Companies Act, 1956. Section 397 enabled any member to apply to the tribunal where “the affairs of the company are being conducted in a manner oppressive to any member”. Section 398 dealt with mismanagement, where the company’s affairs were being conducted in a manner “prejudicial to the interests of the company or to public interest”. The successor provisions under the Companies Act are Sections 241 and 242. Section 241 allows members to complain if “the affairs of the company are being conducted in a manner prejudicial to public interest, oppressive to any member or prejudicial to the interests of the company”. Section 242 of the Companies Act then empowers the NCLT to pass such orders as it thinks fit “with a view to bringing to an end the matters complained of”.
These provisions are drafted in wide terms, giving the tribunal flexibility both in adjudication and in crafting remedies. The question, however, was whether that flexibility extends to deciding issues of fraud and coercion.
Court’s Findings
On Maintainability
The Court rejected the respondents’ objection under section 399 of the Companies Act, 1956, which prescribes minimum thresholds for filing. Since the very issue was whether Mrs. Krishna’s shareholding was unlawfully transferred, the Court held that she could not be denied the right to approach the tribunal.
On Jurisdiction of the NCLT
The Court held that the NCLT’s jurisdiction is broad and covers all matters necessary to decide oppression and mismanagement petitions. Where the allegations of fraud, coercion, or manipulation are inseparable from the claim, the tribunal must address them. Referring to its earlier rulings, including Tata Consultancy Services Ltd. v. Cyrus Investments[2], the Court reiterated that the tribunal’s task is not merely procedural but remedial, i.e. to bring disputes to a meaningful end. Therefore, determining the validity of the gift deed was well within the NCLT’s jurisdiction, as it was central to deciding whether the petitioners had been wrongfully excluded from ownership and control.
On the Gift Deed and Share Transfer
The Court upheld the NCLT’s finding that the gift deed was invalid. The reasons included:
- Clause 16 of the articles of association of the Company did not allow a transfer by gift, making the transfer contrary to the Company’s constitution;
- The share transfer forms were tampered with, showed overwriting, and were used beyond their validity period; and
- The explanations from the respondents lacked credibility and consistency.
On these grounds, the purported transfer of shares was declared void.
On Oppression and Mismanagement
Having established that Mrs. Krishna continued to be the lawful shareholder, the Court examined the conduct of the Company’s affairs. The board meetings of December 2010, which accepted her resignation and inducted new directors, were found to have been improperly convened and carried out in a mala fide manner. These actions amounted to oppression and mismanagement under law. The Court therefore reinstated Mrs. Krishna as shareholder and executive director, setting aside the NCLAT’s order.
Key Takeaways
This ruling sends an important message on the scope of the NCLT’s jurisdiction. Allegations of fraud or coercion cannot be used as a shield to take away the tribunal’s power, so long as those issues are tied to the oppression and mismanagement complaint. Forcing parties into separate proceedings before civil courts would only fragment disputes and undermine the purpose of having a specialised company law forum.
At the same time, the Supreme Court’s reasoning leans heavily on Section 242 of the Companies Act (which relates to remedies), even though the petition arose under the erstwhile Companies Act, 1956. This creates some doctrinal overlap between the “substantive” provisions and the “remedial” provisions. While the approach worked in the present case, where reinstating the dominant shareholder clearly resolved the issue, the same approach may not suit disputes where shareholding is more evenly divided.
Conclusion
The Supreme Court’s judgment in Shailja Krishna v. Satori Global Limited reaffirms the wide jurisdiction of the NCLT in oppression and mismanagement matters. By holding that the NCLT can adjudicate on issues of fraud and coercion when these are central to the dispute, the Court ensures that company law remedies remain effective and complete. This ruling strengthens the role of the NCLT as a one-stop forum for resolving internal corporate disputes, while also drawing careful limits to preserve the role of civil courts in broader matters.
[1] Civil Appeal Nos. 6377-6378 of 2023.
[2] AIRONLINE 2021 SC 179.
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