Kiran Raj

The Supreme Court of India Division Bench of Justice Dipankar Datta and Justice K. Vinod Chandran held that the National Company Law Tribunal (NCLT), Allahabad, was correct in adjudicating allegations of oppression and mismanagement under Sections 397 and 398 of the Companies Act, 1956. The Court set aside the National Company Law Appellate Tribunal (NCLAT)’s order that had dismissed the petition for want of jurisdiction and restored the NCLT’s judgment declaring the impugned share transfer and board resolutions invalid. The Court directed reinstatement of the appellant as director and lawful shareholder, and dismissed the respondents’ appeals, holding that the NCLAT had unnecessarily interfered with the NCLT’s findings.

The dispute centered around Satori Global Limited, previously known as Sargam Exim Private Limited, a private limited company incorporated on 13 April 2006 with an authorized share capital of ₹2 crores. At inception, the subscribed and paid-up capital was ₹3 lakhs. The appellant and her husband, respondent no. 2, were original promoters. The appellant subscribed to 5,000 shares while her husband held 25,000. Later, he transferred 24,500 shares to her, leaving himself with 500, which were further transferred to respondent no. 3. With additional issues of shares, the appellant ultimately held 39,500 shares of the total 40,000, representing more than 98% shareholding.

Also Read: Supreme Court | Criminal Courts Cannot Review or Recall Own Judgments | Only Clerical or Arithmetical Errors Permissible Under Section 362 CrPC

Respondent no. 2 resigned as director in February 2007, and respondent no. 3 was inducted in his place. The company invested significantly in Yash Papers Ltd. (now Pakka Limited), acquiring shares and warrants amounting to approximately 14% of its equity. On 15 December 2010, respondent no. 5 was appointed additional director. On 17 December 2010, the appellant allegedly resigned, and her resignation was accepted at a board meeting attended by respondents no. 3 and 5.

On the same day, a gift deed was purportedly executed in Faizabad transferring her entire shareholding to respondent no. 4, her mother-in-law, out of “love and affection.” Share transfer forms were said to have been executed on 1 October 2010, with extended validity until 12 November 2011. In November 2011, these were used to effect transfer of the appellant’s shares to respondent no. 4.

Meanwhile, the appellant’s marital relationship with respondent no. 2 deteriorated. She lodged police complaints in February and March 2011 alleging coercion into signing blank documents. In June 2011, respondent no. 2 left for the USA and filed divorce proceedings. Around the same period, he was reappointed director, and the company was converted into a public limited company under the name Satori Global Limited.

The appellant subsequently filed further police complaints and informed the Registrar of Companies and Ministry of Corporate Affairs. She discovered her removal from the register of shareholders, with respondent no. 4 substituted. She then filed a company petition alleging oppression and mismanagement before the Company Law Board, later transferred to the NCLT.

On 4 September 2018, NCLT allowed her petition, set aside the board resolutions of 15 and 17 December 2010, restored her as executive director, and declared her the lawful owner of 39,500 shares. It also held the share transfer to respondent no. 4 null and void, directed return of share certificates, and ordered inquiry into irregularities.

Appeals were preferred by the company, respondent no. 5, and respondent no. 4 before NCLAT. On 2 June 2023, NCLAT allowed the appeals, holding the petition not maintainable, as allegations of fraud and coercion required civil court adjudication under the Specific Relief Act, 1963. The appellant challenged this before the Supreme Court.

The Supreme Court recorded that the maintainability of the company petition under Sections 397 and 398 of the Companies Act, 1956, was a specific issue before NCLT and was answered in favor of the appellant. NCLAT had not dismissed the petition for lack of maintainability but had set aside the order citing lack of jurisdiction to decide fraud. The Court observed: “Without anything more, this would have afforded good ground for us to answer this issue in favour of the Appellant.”

On the jurisdictional issue, the Court referred to Radharamanan v. Chandrasekara Raja (2008) 6 SCC 750, noting: “Sections 397 and 398 of the Act empower the Company Law Board to remove oppression and mismanagement. If the consequences of refusal to exercise jurisdiction would lead to a total chaos or mismanagement of the company, would still the Company Law Board be powerless…? Jurisdiction of the Company Law Board having been couched in wide terms… is it not desirable to pass an order which for all intent and purport would be beneficial to the company itself and the majority of the members?”

Citing Kamal Kumar Dutta v. Ruby General Hospital Ltd. (2006) 7 SCC 613, the Court stated: “When CLB exercised its power under Sections 397 and 398 of the Act, it exercised its quasi-judicial power as original authority. It may not be a court but it has all the trapping of a court.”

The Court also referred to Tata Consultancy Services Ltd. v. Cyrus Investments (P) Ltd. (2021) 9 SCC 449: “The Tribunal, by its order, should bring to an end the matters complained of… The object should be to put an end to the matters complained of and not to put an end to the company itself, forsaking the interests of other stakeholders.”

Thus, it concluded: “The NCLT/CLB possess a wide jurisdiction to decide all such matters that are incidental and/or integral to the complaint alleging oppression and mismanagement.”

On oppression and mismanagement, the Court recalled precedents including Scottish Co-operative Wholesale Society Ltd. v. Meyer (1958), Shanti Prasad Jain v. Kalinga Tubes Ltd. (1965), Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. (1981), and Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan (2005). It observed: “Oppression… takes within its fold various forms and actions… a series of illegal acts upon one another can… lead justifiably to the conclusion that they are a part of the same transaction, of which the object is to cause or commit the oppression of persons against whom those acts are directed.”

The Court found the appellant was a victim of oppression and mismanagement, noting: “The circumstances surrounding the gift deed and the subsequent transfer of shares are seriously questionable and must be declared invalid… the board meetings have been conducted in a mala fide manner and against both the statutory requirements of the 1956 Act and the internal regulations of the company.”

On the gift deed, it recorded: “The gift deed is invalid… since it is against the AoA, specifically clause 16. The clause does not allow a transfer to the mother-in-law and, therefore, the gift deed cannot be called in aid to defeat the claims of the Appellant.”

Regarding board meetings of 15 and 17 December 2010, the Court stated: “We are of the considered view that it suffers from fundamental illegality… the requirement of notice being mandatory, non-service thereof renders the meetings invalid… in the absence of the Appellant, the meeting did not have the requisite quorum.”

It concluded: “Collectively taken, all these actions of the company in serial fashion demonstrate clear oppression and mismanagement… Probity is lacking which is prejudicial to the appellant.”

Also Read: J&K High Court | PCDA(P) Cannot Overrule Medical Board’s Disability Assessment | Disability Pension with Rounding-Off Upheld for Ex-Naik

The Court allowed the appeals and restored the NCLT’s judgment dated 4 September 2018. It directed that the board resolutions of 15 and 17 December 2010 stand set aside. The appellant was reinstated as Executive Director of Satori Global Limited and declared the lawful owner of 39,500 shares. The transfer of shares in favor of respondent no. 4 dated 18 November 2011 was held null and void. The company was ordered to reinstate the appellant as Director and respondent no. 4 was directed to return the share certificates within fifteen days.

The Court confirmed that NCLT’s findings of manipulation in the share transfer form and lack of validity could not be interfered with. It refused to examine whether the Registrar of Companies had the power to extend the validity of share transfer forms, holding it unnecessary in light of its finding that the transfer itself was invalid.

Finally, the Court held that interference by NCLAT with NCLT’s judgment was unwarranted. It declared: “We set aside the common appellate judgment and order of the NCLAT on the appeals of the respondents and restore that of the NCLT. These civil appeals are, accordingly, allowed. Parties shall, however, bear their own costs.”

Advocates Representing the Parties

For Appellant(s): Mr. Dhruv Mehta, Sr. Adv. Mr. Ankur Mittal, AOR Mr. Bimal Bhabhda, Adv. Ms. Muskan Jain, Adv. Mr. Keith Varghese, Adv. Ms. Jutirani Talukdar, Adv.

For Respondent(s): Mr. S Niranjan Reddy, Sr. Adv. Mr. Ashutosh Jha, AOR Mr. Ashutosh Gupta, Adv. Mr. Gaurav Rana, Adv. Mr. Oleander D Singh, Adv. Mr. Shivam Tomar, Adv. Mr. Gopal Sankaranarayanan, Sr. Adv. Ms. Sansriti Pathak, AOR Ms. Meha Aggarwal, Adv. Mr. Aman Prasad, Adv. Mr. Shourya Dasgupta, Adv. Ms. Trisha Chandran, Adv.

Case Title: Mrs. Shailja Krishna v. Satori Global Limited & Ors.

Neutral Citation: 2025 INSC 1065

Case Number: Civil Appeal Nos. 6377-6378 of 2023

Bench: Justice Dipankar Datta, Justice K. Vinod Chandran