Pranav B Prem

The National Company Law Appellate Tribunal (NCLAT), New Delhi, has held that the non-declaration of beneficial ownership under Section 89 of the Companies Act, 2013, does not amount to oppression and mismanagement. The Tribunal observed that Section 89 places a statutory duty upon the owner of shares to make the required declaration, and failure to do so attracts penalties under the Act but cannot be construed as an act of oppression or mismanagement.

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The Division Bench comprising Justice Yogesh Khanna (Judicial Member) and Mr. Ajai Das Mehrotra (Technical Member) dismissed an appeal filed under Section 421 of the Companies Act, 2013, challenging the order of the National Company Law Tribunal (NCLT), Jaipur Bench, which had dismissed the company petition at the threshold.

The appellant, Satyanarayan Gupta, claimed to be the beneficial owner of 5,000 equity shares—constituting 50% of the total shareholding—in Shivangan Realestate Pvt. Ltd. (Respondent No. 1). He alleged that Respondent No. 3 had wrongfully acquired his shareholding and that such acquisition had been expressly acknowledged by both the respondents through a Memorandum of Understanding (MoU) dated 1 January 2022. The appellant contended that the respondents had failed to declare the beneficial ownership of the shares as required under Section 89 of the Companies Act, thereby engaging in acts of oppression and mismanagement.

The company’s records, however, indicated that the appellant had himself transferred his shares to Respondent No. 3 in 2017, and the transfer had been duly reflected in the company’s statutory registers since then. The MoU executed between the parties recorded that the appellant had borrowed money from Respondents No. 2 and 3 and had transferred certain jointly owned properties to them as security for the loan. As per the terms of the MoU, the respondents were to re-transfer the shares and directorship back to the appellant upon repayment of the loan amount, which was computed at ₹11 crore, along with additional monthly payments of ₹5 lakh and other dues amounting to ₹78 lakh.

The dispute primarily concerned a parcel of land at Chand Ji Ki Dhani, Jaipur, which was jointly purchased by the parties and registered in the name of the respondent company. It was agreed that upon sale of the property, the proceeds would be equally shared. However, as the appellant failed to repay the loan or make any further payments under the MoU, the respondents proceeded with the sale process. The appellant filed a civil suit in this regard, which was dismissed under Order VII Rule 11 of the Civil Procedure Code. The Civil Court held that the disputed property belonged to the respondent company and that the appellant, having ceased to be a shareholder or director, had no locus standi in the matter. The findings of the civil court were never challenged and had attained finality.

Before the NCLAT, the respondents argued that the company petition was not maintainable, as the appellant was neither a member nor a shareholder of the company and the petition was filed only to enforce private contractual obligations under the MoU, to which the company was not even a party. They also submitted that the appellant had not repaid the loan or any interest thereon and, therefore, could not seek equitable relief in the form of an injunction or a status quo order.

The Tribunal observed that the NCLT had rightly concluded that non-compliance with Section 89 could not be treated as oppression and mismanagement. It clarified that Section 89(5) of the Companies Act imposes a statutory obligation on the person holding shares to declare to the company the details of the beneficial owner. Failure to make such a declaration merely results in penalties under the Act and does not constitute an act of oppression within the meaning of Sections 241–242 of the Companies Act.

The Bench further noted that the appellant himself, in his company petition, had sought a declaration recognizing him as the beneficial owner of the shares, which placed the obligation on him to make the statutory declaration under Section 89. The Tribunal held that the avoidance of such a declaration by the appellant rendered him liable for penalties and that he could not shift the responsibility to the respondents.

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Rejecting the appellant’s plea, the NCLAT held that the entire controversy was rooted in private disputes relating to loan transactions and contractual obligations under the MoU, and not in the affairs of the company. Consequently, the Tribunal found no merit in the appeal and upheld the order of the NCLT, Jaipur, dismissing it. Accordingly, the appeal was dismissed, and all pending applications were closed.

Appearance

For Appellant: Mr Abhijeet Sinha, Sr Advocate, Mr Gaurav Mitra, MrNaresh Kumar Sejwani, Ms Aishwarya Hodi, Advocates.

For Respondent: Mr Krishanendu Datta, Sr Advocate, Mr Tanuj Sud, Mr Ajay Kumar, Ms Stuti Vatsa, Mr Vijayant Goel, Mr Govind, Advocates.

Cause Title: Satyanarayan Gupta Appellant Vs Shivangan Realestate Pvt Ltd & Ors

Case No: Company Appeal No.228 of 2025

Coram: Justice Yogesh Khanna (Judicial Member), Mr. Ajai Das Mehrotra (Technical Member)